Key Takeaways
The S&P 500 pushed to another record high Friday, even as Goldman Sachs’ trading desk warned the rally is “completely disconnected from reality,” citing an 18-day winning streak in chip stocks that has ignored rising oil prices and geopolitical risk.
“The market is high, energy is high, and more importantly, this is not a simple shock that can be quickly reversed,” Rich Privorotsky, head of the Delta One trading desk at Goldman Sachs, wrote in a note. “From a longer-term perspective, the buying momentum here is much less than before, and the asymmetry is tilting to the other side.”
The Philadelphia Semiconductor Index (SOX) has climbed for 18 straight trading sessions, its longest streak on record, delivering a 41 percent return that handily beats the S&P 500’s 12 percent gain over the same period. The rally has been fueled by strong results from AI-related companies like Nvidia, TSMC, and Intel, whose earnings trounced estimates. However, this surge has occurred even as U.S. bond yields remain elevated and oil prices are climbing on tensions in the Strait of Hormuz.
The divergence creates a fragile situation for investors. With the NAAIM risk exposure index jumping to a high of 94, traders are heavily positioned for more gains, leaving little room for error. Goldman warns that the market is vulnerable to a sharp correction should a headline on the geopolitical front force investors to re-evaluate the macroeconomic risks they are currently ignoring.
This article is for informational purposes only and does not constitute investment advice.
