Goldman Sachs trader: The US stock market is just like in 1999, everyone is trading liquidity—who still cares about fundamentals? People feel that "money is depreciating, so it's better to spend it than to hold it."

Goldman Sachs trader: The US stock market is just like in 1999, everyone is trading liquidity—who still cares about fundamentals? People feel that "money is depreciating, so it's better to spend it than to hold it."

“The currency is depreciating, it's better to spend it than hold it”—when this mindset begins to spread, the logic of trading in the US stock market changes accordingly.

According to Wind Chasing Trading Desk, Goldman Sachs traders released their latest market insight report on September 21, stating that the current US stock market environment bears a striking resemblance to the internet bubble in 1999, with the market entering a liquidity-driven speculative phase.

Despite Moody's recession model flashing a red light—with a 48% probability of recession in the next 12 months—market participants seem to have put fundamentals aside and are fully engaging in a liquidity-fueled frenzy. Goldman traders even predict: "In the next three to six months, the economy and market will surge strongly."

"We are no longer trading on fundamentals," the report states bluntly. "We are trading liquidity, positioning, and market patterns."

1999 Redux? Fundamentals Take a Back Seat

"We’ve been here before," wrote the Goldman trader. "Think of 1999—after the selloff in August 1998, the Fed’s bailout completely reversed the market narrative, and the market became a slave to price action." He believes today’s situation is the same: what matters now is not fundamentals, but market positioning and price behavior itself.

On one hand, economic contradiction signals do exist. Rate-sensitive cyclical sectors such as freight, autos, chemicals, and real estate are showing recessionary pressures. On the other hand, sectors like services, healthcare, technology, defense, and artificial intelligence are still expanding. More importantly, US consumer spending remains unusually strong.

The trader specifically mentioned a widespread market mentality: "There’s a sense that since money continues to depreciate, it’s better to spend it than hold it." This concept, combined with the unprecedented high exposure US consumers have to the stock market, forms a robust underlying market force.

Liquidity and “FOMO” Sentiment Dominate

Based on his observation of market sentiment, this trader made his core judgment. He pointed out that, as the risk event of the Federal Reserve passes, the protective hedging positions previously used are being unwound, and this closing itself provides fuel for the market to rise.

“Market risk is shifting from fear to ‘fear of missing out’ (FOMO).” He wrote. Based on this sentiment shift, he made a very clear short-term forecast: “In the next 3-6 months: the economy will rip, and the market will rally hard.”

How to Trade This ‘Frenzy’?

In the Goldman trader’s view, the most effective strategy now is to embrace risk, specifically on two fronts:

First, in the stock market, engage in “growth vs. value” or “junk vs. quality” pair trades. That is, consider going long the Nasdaq 100 Index (NDX) or the ARKK ETF, while going short the Russell 2000 Index (RTY) or GVIP, funds of high-quality value stocks.

“When ARKK is outperforming, it's a junk stock era.This trend is just beginning.”

Secondly, at the macro level, bet on a steeper yield curve. He specifically mentioned the “2s30s steepener” trade, that is, going long the spread between the 2-year and 30-year Treasury yields. He explained that regardless of whether the economy strengthens or weakens, this strategy could prove profitable.

Loose Financial Conditions Are the Driving Force

Why can the market ignore recession signals? The key is one word: liquidity.

The trader analyzed that this is a trade driven by financial conditions. The Fed cuts rates in the cyclical upturn phase, combined with fiscal stimulus, providing companies with plenty of "ammunition" for buybacks. In the rate market, front-end yields (like the 2-year Treasury yield) are no longer highly sensitive to above-expectation economic data, indicating the market expects rates to be firmly controlled.

He believes the market has shaken off the so-called “rolling recession” and is entering a rally driven by financial conditions. As liquidity valves loosen, risk appetite trickles down accordingly: from quality assets to junk assets, from fundamental investing to pure speculation.

But the real risk lies in the retreat of artificial intelligence—massive capital expenditure by giants like Amazon, Google, META, Microsoft, and Oracle will determine whether AI continues to develop or stagnates.

 

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The above exciting content is from Wind Chasing Trading Desk.

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Risk Warning and DisclaimerThe market has risks and investment needs caution. This article does not constitute personal investment advice and does not take into account any specific user’s investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investment based on this article is at your own risk.