Goldman Sachs(US:GS) Xin Lang Cai Jing·2025-12-03 16:45Core Viewpoint - The stock market is likened to a boxing match, with bullish drivers like artificial intelligence and stimulus measures facing off against bearish forces such as high valuations and credit pressures [1][6]. Group 1: Bullish Factors - The S&P 500 index is set to record a double-digit gain for the third consecutive year, with the "seven tech giants" expected to inject approximately $600 billion into the U.S. economy through capital expenditures [1][6]. - Discussions around lowering income taxes and issuing $2,000 stimulus checks are also supportive of the bullish outlook [1][6]. - Additional bullish factors include the end of quantitative tightening, ongoing deficit spending, and $1.2 trillion in buyback authorizations expected by 2026 [1][6]. - Retail investors continue to enter the market and buy on dips, and there are anticipated relaxations in banking regulations and capital requirements by 2026 [1][6]. Group 2: Bearish Factors - Market valuations have been pushed to levels that leave little room for disappointment, with market breadth deteriorating to one of the narrowest levels in the past 20 years, heavily concentrated on the theme of artificial intelligence and its capital expenditures [3][8]. - Concerns about a "K-shaped economy" are rising, leading to increased pressure on certain consumers, higher default rates among low-income households, and new pressures in the private credit sector [3][8]. - The dynamics of the labor market may shift from being a driving force to a hindrance [3][8]. Group 3: Market Sentiment and Future Outlook - Many Wall Street strategists expect the upward trend in the U.S. stock market to continue into 2026, with firms like Deutsche Bank, JPMorgan, Morgan Stanley, UBS, and HSBC predicting double-digit returns supported by solid earnings and Federal Reserve rate cuts [3][8]. - Despite this optimism, there is hesitation among investors regarding bets on artificial intelligence due to ongoing concerns about valuation levels and whether significant investments in computing power will ultimately translate into profits [3][8]. Group 4: Market Behavior and Trader Sentiment - Current traders lack "muscle memory" for sustained pullbacks or corrections, having only experienced an unprecedented bull market over the past 15 years [4][9]. - This has led to a mindset where many participants believe that market bottoms are always present [4][9]. - While nothing can last indefinitely, the current market rally has persisted longer than many anticipated, rewarding those who have held on [4][9]. - If a market correction does occur, the ultimate winners are likely to be those who have previously experienced similar market conditions [4][9].