Beneath the calm surface of US stock indices, undercurrents are stirring: Goldman Sachs partners reveal four key market drivers.

While the S&P 500 index appears to be experiencing limited volatility, the market may be undergoing a dramatic revaluation. In his latest market commentary, Goldman Sachs partner Bobby Molavi points out that AI regulatory controversies, oil prices breaking $100, the 10-year Treasury yield rising above 5%, and expectations of a Fed rate hike are all simultaneously disrupting the market, resulting in a clear disconnect between the index's performance and its internal structure.

Molavi noted that while the S&P 500 is still hovering around the level of around 7600 points seen in early June, significant changes have occurred in factor rotation, regional market fluctuations, and price differences between different investment themes. The market appears to be undergoing a portfolio rebalancing rather than a typical style shift. Some Asian markets have already shown signs of an "overly optimistic rebalancing," with the performance divergence between software and semiconductors, and between short-term and long-term momentum, widening further.

A prominent feature of the current market is that positions are relatively clean, but volatility at the factor level is more pronounced. Previously strong sectors have experienced sell-offs, with funds shifting to software and defensive sectors. Momentum factors have seen one of the most dramatic single-day reversals in nearly five years, leading to increased market vulnerability.

AI regulatory controversy intensifies, but the logic behind capital expenditure remains unchanged.

Recent discussions surrounding the rapid development of cutting-edge AI models and the boundaries of regulation have intensified, raising concerns that the AI industry may face stricter policy constraints. These controversies have, on the one hand, propelled AI regulation into the forefront of policy discussions, and on the other hand, sparked debate about whether leading companies in the industry might use regulation to raise entry barriers.

However, regulatory controversies have not changed the core logic of AI capital expenditure. Recent corporate surveys show that AI has begun to be used to shorten product design cycles, automate jobs, and improve production efficiency, and market attention is gradually shifting from infrastructure investment to AI commercialization and actual benefits.

As the supply of computing power gradually increases, the previous scarcity premium of chips and computing power is narrowing, while the software sector is regaining investor attention. The core logic of AI trading is shifting from "how much to invest" to "how much return can be generated".

Oil prices break through $100, supply risks extend into winter.

Oil prices have firmly established themselves above $100 and risk rising further to $110. Recent attacks on Middle Eastern energy infrastructure have disrupted some key oil transport routes that bypass the Strait of Hormuz, further jeopardizing global crude oil supply.

Meanwhile, low global oil inventory levels and slowed traffic in the Strait of Hormuz and related oil pipelines will weaken the ability of some buyers to release their inventories into the market. With tanker freight rates, war risk premiums, and insurance costs rising simultaneously, the crude oil supply shock may be further amplified through transportation and storage.

With the peak winter demand season approaching, consumers are already facing high living costs. If oil prices continue to rise, energy and transportation costs may be further passed on to end consumers, increasing inflationary pressures.

US Treasury yields break through 5%, refinancing pressure continues to accumulate.

The yield on the 10-year U.S. Treasury note rose to break through the key 5% mark for the first time since 2007. Inflationary pressures, economic resilience, fiscal deficits, changes in investor structure, and large-scale bond issuance have all contributed to the rise in global bond yields.

The U.S. Treasury had previously attempted to improve market liquidity and alleviate yield pressures through repurchase operations, but with limited success. Meanwhile, U.S. Treasury bonds face significant rollover needs: of the approximately $7 trillion in short-term Treasury bills, about $6.1 trillion will mature within the next year, with approximately $4 trillion and $3.5 trillion requiring refinancing in 2027 and 2028, respectively.

Against the backdrop of high fiscal deficits and a continuous increase in bond supply, refinancing demand is likely to continue to be a significant supply-side disturbance in the bond market.

Inflation and employment data present the Federal Reserve with a dilemma.

Global central banks are facing a more complex policy environment: economic growth requires policy support, but energy prices and inflationary pressures limit the scope for easing. Maintaining high interest rates or even further tightening could increase the debt burden of governments, businesses, and households.

Recent US economic data has further increased policy uncertainty. The PPI rose 5.4% year-on-year, August job growth reached 162,000 (with upward revisions to the previous two months' employment figures), and the CPI rose 3.4% year-on-year, with inflation still significantly above the Federal Reserve's 2% target. Meanwhile, the recent rise in oil prices has not yet been fully reflected in future inflation data.

Against this backdrop, market disagreements persist regarding the Federal Reserve's policy path, and the FOMC meeting and its policy guidance will be a significant catalyst affecting asset prices in the near term.

Momentum factors reversed sharply, and the market continued to restructure.

Besides macroeconomic factors, the restructuring of factors within the market is also worth noting. Currently, overall positions have decreased significantly compared to before, with total exposure, net exposure, long-short ratio, leverage ratio, and concentration all declining. The size of leveraged ETFs has also decreased.

However, at the same time, the momentum factor is experiencing unusually sharp fluctuations. There is a relative fluctuation of about 11% between the three-month and 12-month momentum combinations, and the daily underperformance of long-term momentum is the largest in nearly five years.

Previously dominant AI-related trades experienced a sell-off, while software and defensive sectors rebounded, indicating a short-term shift of funds towards energy, quality, and defensive sectors. The previously strong correlation between momentum factors and the AI theme is weakening, and the market's internal trading logic is undergoing a rapid reshuffling.

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