Goldman Sachs trader: The US stock market in 2026 is a "boxing match"

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Goldman Sachs macro trader Bobby Molavi described the outlook for the U.S. stock market in 2026 as a "boxing match," with bullish drivers and rising bearish risks facing off head-to-head.

On December 3, Molavi pointed out in a client report that the bulls' confidence mainly comes from the artificial intelligence (AI) boom and large-scale stimulus measures. He estimates that the “Tech Magnificent Seven” alone will contribute about $600 billion in capital expenditure to the U.S. economy. In addition, discussions over potential income tax cuts and $2,000 stimulus checks have also added momentum to the market.

However, Molavi also warned that bearish forces should not be underestimated. He believes that current stock valuations have been driven to extremely high levels, leaving virtually no room for error. More worrisome is that the market has become "extremely dependent" on the single theme of AI, with market breadth deteriorating to one of its narrowest levels in the past two decades.

This standoff between bulls and bears suggests that after a prolonged uptrend, the market is facing a critical turning point.

Bulls: AI and Trillions in Liquidity Build the Defense

In Molavi's view, the positive factors supporting the 2026 stock market are concrete and strong. In addition to the massive capital spending by tech giants, a series of macro- and micro-level liquidity supports are gathering.

He wrote in the report that factors backing the bullish view also include: the end of quantitative tightening (QT), ongoing U.S. fiscal deficit spending, as much as $1.2 trillion in 2026 stock buyback authorizations, continuous “buy-the-dip” behavior by retail investors, as well as potential banking deregulation and relaxation of capital requirements that may occur in 2026.

Combined, these factors constitute strong capital and policy support.

Bearish Warnings: Valuations, Credit, and "K-shaped" Divergence

A sharp contrast to the optimistic outlook is a series of accumulating risks. Molavi emphasized that beneath the surface of rising stock indexes, the health of the economy and market is far from balanced.

He pointed out growing concerns about the so-called "K-shaped economy," meaning that the economic recovery is showing polarization. Specifically, some consumer groups are experiencing financial stress, default rates among low-income households are rising, and stress is beginning to appear in the private credit market.

Molavi also noted he has observed the phenomenon of “AI circularity,” meaning that the booming AI sector is being financed to an increasing degree by leverage expansion. In addition, the labor market, which once provided a boost to the market, may also shift from a positive factor to a hindrance.

Market Psychology: Traders Without "Muscle Memory"

Beyond fundamentals, Molavi also raised a unique risk from the perspective of market participants. He pointed out that the unprecedented 15-year bull market has resulted in most current traders lacking the “muscle memory” to cope with sustained declines or deep corrections.

“Most of the ‘players’ in today’s market have only seen one kind of market,” Molavi wrote. This experience has led a generation of market participants to habitually believe there will always be a bottom in the market, and to firmly believe that “buying the dip” is an eternally effective strategy.

He stated, “On the one hand, nothing is forever,” but “on the other hand, the duration of this rally has surpassed anyone's imagination.” Molavi believes that if the market does experience a real correction, those investors who have lived through bear market cycles and are more experienced will be more likely to emerge as winners.

Risk warning and disclaimerThe market carries risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account any individual user's specific investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing accordingly is at your own risk. ```