Goldman Sachs hedge fund chief: In a market where "you can make money just by buying with your eyes closed," don't bet against the bull market—"US stocks still have room to run."

```

Tony Pasquariello, head of Goldman Sachs' hedge fund division, pointed out in a recent report that although certain areas of the market are showing signs of overheating, investors should not go against the current bull market trend.

Pasquariello acknowledged that some market indicators are approaching the "red zone." He observed that some fast-growing sectors are exhibiting "vertical rises," while discretionary investors have started to chase highs and demand for call options has surged in the options market. He also reminded that quarterly option expiries often add fuel to short-term market movements, but can also lead to a post-expiry "hangover" correction effect.

At the same time, there are even stronger bullish reasons for the market. Pasquariello stressed that the Federal Reserve has made it clear it intends to cut interest rates a number of times on the back of an accelerating economy, and the stock market has evidently caught wind of this positive signal. The bullish narrative was not shaken by last week’s Fed meeting; in fact, it propelled cyclical stocks to hit new highs relative to defensives. Meanwhile, U.S. tech stocks continue to deliver good news, such as Intel’s stock price soaring 23% and Google joining the $3 trillion market cap club.

Overall, Pasquariello’s final conclusion is "neither fight the trend nor blindly chase the highs." He admitted he does not like the current positioning and tactical risk-reward setup, and suggests adopting a "responsible bullish" strategy. But he also conceded that the market performance in recent weeks shows that such caution might not be aggressive enough, because this "has long been a market where 'irresponsible bullishness' is rewarded." On March 6, 2009, the S&P 500 closed at 666 points, and over 6,000 days later, it closed at 6,664 this Friday.

Optimism Far from Peaking, More Room to Rise

Despite the market hitting new highs repeatedly, multiple investor sentiment indicators show that market optimism is far from reaching a frenzy, suggesting there is still room for more capital to enter. According to Goldman’s Rich Privorotsky, the AAII bull-bear indicator, which measures individual investor sentiment, is currently near zero—far from the +20 level that signals extreme optimism. At the same time, the NAAIM exposure index has been flat since summer, and CNN’s Fear & Greed Index is only at 61, none of which point to “euphoria.”

Goldman’s own major brokerage business data show that while fundamental investor gross exposure has risen, net exposure remains limited. This indicates that hedge funds are actively trading to gain beta and alpha, but still hesitate to chase highs. The analysis believes that the main theme in September’s market is that investors are gradually embracing the “Goldilocks” economic narrative. The conclusion is that although net long positioning in the market has increased compared to a few weeks ago, “few are taking excessive risks,” meaning the market still has capacity to absorb new capital.

Behind the strong bullish trend is dual support from Fed policy and the U.S. consumer fundamentals. Pasquariello particularly pointed out that historical experience shows that when the Fed cuts rates as economic growth is picking up, the stock market benefits significantly. Currently, the market is in such a rare, favorable environment.

Meanwhile, the resilience of U.S. consumers forms the firm foundation of the economy. A clear message from Goldman’s recent retail and tech industry conference is that U.S. consumption remains robust. While Pasquariello is concerned about lower-income households, CEOs of U.S. companies closely tied to total consumption generally believe that business activity remains healthy, which aligns with Tuesday’s retail sales data release.

It’s Too Early to Worry About Market Breadth, Tech Innovation provides Strong Momentum

On the debate regarding market breadth, Pasquariello believes there is no need to over-worry at present. He likens this debate to a sports radio talk show—everyone has strong opinions, but many will ultimately be proven wrong. While some indicators (such as the S&P 500 Equal Weight Index vs. market cap weight, the share of stocks reaching 52-week highs, etc.) show market breadth is still narrow, an undeniable fact is that all 11 primary sectors under the Global Industry Classification Standard (GICS) have posted positive year-to-date total returns.

Furthermore, capital market activity is closely tied to technological innovation. He believes that this year will be remembered as a year in which "the pace of innovation took a step change," with remarkable progress in hot areas such as robotics, autonomous driving, drones, quantum computing, and satellites. This wave of innovation is not only powering individual stocks higher, but also reactivating the capital market in September, which is good news for all types of investors.

The structure of the market and the investor’s toolkit are also undergoing profound changes. A striking data point is that systematic options trading ETF assets under management have soared from $12 billion to $170 billion in five years. Pasquariello believes this is a positive dynamic for the trading ecosystem, for example, by providing ample short-term gamma supply to market makers.

In terms of alternative assets, Pasquariello points out two trends worth noting. First, if the “insurance value” of government bonds in a risk-off environment continues to fall, it will only drive more capital into gold. Second, decentralized finance (DeFi) and traditional finance are rapidly converging, as almost every market recap now discusses the price behavior of Bitcoin (BTC) together with stocks, bonds, currencies, and commodities, indicating the growing mainstream adoption of digital assets.

Risk Warning and DisclaimerThe market carries risks and investment needs to be cautious. This article does not constitute individual investment advice, nor does it consider any specific user’s unique investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investing accordingly is at your own risk. ```