US stocks rebounded rapidly, Goldman Sachs: There is limited room for short-term upwards, but there is a high risk of retracement. All problems at the beginning of the year are

Source: Wall Street News

After the recent rapid rebound of US stocks, Wall Street Bank's latest warning is that the market's retracement is high risk.

According to the Fengfeng Trading Station, Goldman Sachs said in a research report released on May 15 that although tariff negotiations send positive signals and market confidence has recovered, this does not mean that the risks have been eliminated.

The report pointed out that the Trump administration's effective tariff level is still far higher than the level before the so-called "reciprocal tariffs" was announced on April 2, and the US stock market still faces risks such as high valuation, market concentration and slowdown in growth.

In early April, the U.S. stock market was turbulent, with the S&P 500 falling nearly 20% and the Nasdaq falling 23%.With the United States and Britain announcing a trade agreement, coupled with the Sino-US trade negotiations far exceeding expectations, market confidence has recovered and US stocks have also rebounded higher.

Goldman Sachs believes that this shows that the bear market in early April is driven by events (Trump tariffs), mainly triggered by external shocks.

Have the risks disappeared now?

The report pointed out that although the tariff news is gratifying, high tariffs still exist and growth will slow.In the United States, tariff impacts are inflationary and there is still high uncertainty.

And Goldman Sachs believes that the Fed may be less willing to cut interest rates, and now they expect the Fed to start three rate cuts later than previously expected (December rather than July).Therefore, Goldman Sachs pointed out in its report:

The market faced its obstacles at the beginning of the year

The report stressed that many obstacles that existed at the beginning of the year have reappeared, including high valuations, market concentration and high risks (for example, trade and AI large-scale investment returns).

Goldman Sachs believes that pricing of cyclical stocks indicates that the market has few downside risks to growth, so if hard data starts to deteriorate significantly from here, investors may once again set a higher price for the possibility of a recession.

In addition, the report pointed out that the valuation of US stocks has also risen, and the US market has once again approached its historical highest price-to-earnings ratio.

Diversification strategy: Regional and industry allocation is key

In the report, Goldman Sachs' most recommended investment is still diversified, and stressed that if the US dollar continues to weaken, the reasons for diversification will be more fully implemented.

Goldman Sachs said that while the focus on U.S. technology stocks are underperforming this year, investment opportunities have shifted to a wider portfolio of industries, regions and styles since interest rates rose in 2022.Take European banks as an example, they have faced numerous obstacles but have begun to recover.

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