After a turbulent week, Goldman Sachs' top traders remain bearish on the US dollar, bullish on US stocks and "stores of value".

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"This has been a fast-moving but unbalanced week, and some major unanswered questions remain unresolved in the end."

After a week of market turbulence, Tony Pasquariello, head of Goldman Sachs Hedge Fund Sales, said in a weekend client report that even though last week’s market data was mixed and failed to provide investors with clear answers, he still adheres to his core macro view: remain bearish on the US dollar, while bullish on US equities and 'store of value' assets represented by gold.

Wall Street’s Confusion: Good and Bad News Battle — Which to Believe?

The market has just experienced a "roller coaster" week. The future direction of the economy and investment hotspots appear confusing, and the mix of good and bad news is leaving investors bewildered.

At the start of the week, the S&P 500 index approached its high point, volatility was low, and the market was clearly pricing in an upswing led by tech stocks with the expectation of entering a rate cut cycle. However, after a week of turbulence, the market has not reached a consensus on whether it is “pricing in too far ahead.”

Pasquariello believes that the real trajectory of current growth is not clear to many, and there remains a significant gap between real economic growth and the market’s expectations for future growth. He highlighted two core points of controversy in the current market:

First, are US consumers really holding up? He admitted that from the large volume of data released this week, the objective conclusion is that the labor market is softening. But does that mean consumer spending is collapsing?

“The answer is not necessarily,” he wrote. Pasquariello revealed that Goldman hosted a major industry conference this week, and the general tone among corporate executives in attendance was positive. Consumer enthusiasm is “much better than expected,” despite pockets of weakness, such as in the restaurant sector.

Second, how much longer can the AI craze last? Artificial intelligence (AI), unquestionably the star of this year’s investment scene, has seen some of its hottest leading stocks show signs of fatigue recently, seemingly pouring cold water on the trend. A Goldman internal index measuring the performance of AI leaders versus laggards (GSPUARTI) has recently lost momentum, which is proof.

However, this does not mean all large tech stocks are under pressure. At the same time, other tech giants like Google and Broadcom have quietly hit new highs. This shows that, while the AI story has become less unanimous, the overall power of tech stocks remains strong — it’s just that the "leaders" are changing.

The report cites analysis pointing out that a key turning point for AI trades will be a slowdown in "hyperscaler" capital spending. In the extreme scenario, if capital expenditure and growth expectations return to 2022 levels, the S&P 500 could face a 15%-20% downside risk, though this is seen as unlikely.

Embracing US Equities and 'Stores of Value', Shorting the Dollar

Facing the general confusion in the market, Pasquariello does not hesitate to restate his three core trading strategies:

Go long US equities, while acknowledging short-term technicals are deteriorating, and recommends investors hedge appropriately.Short the dollar, with a chart showing the dollar index is at a key technical test level.Go long "store of value" assets, emphasizing that gold’s chart “speaks for itself.”Leans towards further steepening of yield curves in major global economies (G-4).

He especially emphasizes a preference for “store of value” assets, bluntly stating “gold’s trend speaks for itself.” At the same time, he believes US equities remain worthy of investment in the long run. However, he also reminds clients that short-term technical signals are unstable and some turbulence may lie ahead, advising appropriate risk hedging when possible.

Regarding the US dollar, Pasquariello believes it is likely to weaken. A chart in the report shows the dollar index is currently sitting at a very important position — just barely holding onto the long-term upward trend line since the financial crisis, a point which could either provide support or, if broken, quickly accelerate a decline.

Regarding the yield curves of major global economies, he still leans toward the view that yield curves of G-4 nations will become steeper, but also notes that while some agree, a market consensus has not yet formed according to global price movements.

Risk Warning and DisclaimerThe market entails risks, and investment should be made with caution. This article does not constitute personal investment advice, nor does it take into account the individual investment objectives, financial circumstances, or needs of any specific user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investments made accordingly are at your own risk. ```