Goldman Sachs macro traders on US stocks: Last week may have been the top of the rebound, and this week there will be slight signs of a reversal.

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The "busiest moment" of the current US stock market rebound may have already passed.

US stocks have recently experienced a sustained rebound. The Nasdaq Index has risen for three consecutive weeks, closing higher for 11 out of the 13 trading days prior to this week.

In the view of Goldman Sachs veteran trader Bobby Molavi, the current market shows a contradictory state: on one hand, there is exuberant sentiment at the index level, but on the other, client positions do not fully match this apparent prosperity. Molavi warns that various signs indicate last week may have been the top of this rebound, and there are signs of a pullback this week. In other words, the liveliest moment of the short-term party may be over, and it is time to consider risks.

Risks Behind the Tech Stock Frenzy

Last week’s performance of US tech stocks can be described as “crazy”: non-profitable tech stocks were up 8%, the most popular shorted stocks rose 6.7%, quantum-themed stocks jumped 30%, nuclear energy stocks rose 10%—all in just five days. Meanwhile, the Nasdaq Index has risen for three consecutive weeks, with 11 days of gains in the 13 days before this week.

Despite strong recent market performance, investment has actually become trickier. Amid the index frenzy, last week marked the first time in six weeks that fundamental investors experienced negative alpha, and systematic funds fell by 1.3%. Compared to the most popular shorted stocks, core hedge fund holdings fell 5.9%; large tech stocks fell 5.7% compared to non-profitable tech stocks.

Molavi believes it is difficult to determine whether we are currently in a tech bubble, as the Nasdaq has risen in 16 out of the past 17 years, for a cumulative return of about 2,250%. Moreover, the PE ratio of the five largest companies is currently 28, still some distance from the historical peaks of 40 (2021) and 50 (2000).

However, there are some worrying signals in the market: in the primary market, signs of "bubbling" are re-emerging as some companies raise funds at valuations at or above 100 times annual recurring revenue. In the secondary market, companies like Palantir are trading at 70 times revenue.

Market Positioning Analysis: Hidden Risks Beneath Surface Prosperity

In terms of the macro environment, the market appears to be pricing in quite an optimistic outlook: no imminent recession, falling interest rates, the benefits of a Fed cutting cycle starting to emerge, AI dividends, and stable corporate profits and margins.

A direct reflection of this optimism is that the US market now has four companies with market caps over $3 trillion, and the top five companies account for 20% of global stock market value. Even more impressive, 9 of the top 10 US companies are essentially AI concept stocks, with even Oracle knocking at the door of the top 10.

However, Molavi keenly points out a key contradiction: despite a range of concerns—politics, fiscal issues, deficits, geopolitics, the dollar, tariff impacts, reflation, labor market, etc.—seeming to have been artificially compartmentalized and ignored, actual client positioning does not match the exuberance at the index headline level:

Investors are uneasily holding long positions… while wishing they held even more positions.

The Confusion in Judging Market Cycles

Against the backdrop of the AI boom, Molavi raises a key question: For investors, what stage of the cycle are we currently in?

Molavi notes that since the global financial crisis, US stocks have gone through a 16-year-long expansion cycle. Historically, recessions have been short and severe, with every swing addressed more quickly and efficiently, enabling the start of a new "cycle."

This leads to a key question: Are we at the end of a cycle, or the start of a new one? A new cycle marked by deregulation, transformative technology, lower rates and capital costs, high employment and savings rates, as well as a surge in corporate activity and government spending? Is the market heading toward the bust of 2000/01, or is it more like 1998, the eve of all-out euphoria?

In Molavi's view, the market may be going through a transition from frenzy to calm. Last week may have marked the top of this rebound, and signs of a pullback have emerged this week.

From the perspective of investor positioning, crowded tech trades, all-in bullishness from retail investors, and complex hedging strategies by institutional investors all point to a potential turning point.

More importantly, the market is no longer trading on fundamentals, but on liquidity, positioning, and trend. This often signals that greater volatility may lie ahead, and investors need to prepare for a potential directional shift.

Risk Warning and DisclaimerThe market involves risk and investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment goals, financial situation, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situations. Investing based on this article is at your own risk. ```