The first thing I do every morning is check SK Hynix’s stock price! A Goldman Sachs partner laments: People are obsessed with leverage and have no fear.
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A Goldman Sachs partner warns that market sentiment has entered an extremely greedy state, momentum trading exposure has reached a record high, and multiple signals indicate that the single AI narrative dominating the market may be nearing a turning point.
Goldman Sachs partner Mark Wilson wrote in his latest weekly report that his morning routine has changed; previously, he would first check Middle East headlines, now the first thing he does upon waking is to check the price of Korea's SK Hynix stock.
This detail reflects a collective shift in market attention: The wave of investment in AI computing power has completely overshadowed geopolitical risks, becoming the core narrative driving global asset pricing.
Wilson stated directly in the report, The current market state is "All Greed, No Fear".
Market greed indicators are maxed out, momentum trading reaches record levels
Wilson listed three prominent technical features of the current market, pointing to overheating risks.
First, sentiment indicators are extremely tilted toward greed. The call/put ratio in the US options market is now in the historical extreme range.
The five-day retracement difference between large-cap tech stocks and Goldman Sachs's "unprofitable tech stock basket" has reached or even surpassed the frenzy levels of 2021.
Second, large-scale inflows of leveraged capital. The assets managed by single-stock 2x and above leveraged ETFs have surged notably, especially focusing on the memory chip sector.
Wilson jokingly wrote:
I'm not the only one who checks Hynix's price every morning.
Third, momentum is the current strongest factor. In Goldman Sachs's global prime brokerage book, momentum strategy exposure has reached a new record.
EPS growth fundamentals support the rally, but stagnate outside AI
Aside from highly excited sentiment indicators, fundamentals are still providing considerable support.
Since the beginning of this year, the S&P 500 has risen about 10%, EPS forecasts have increased around 15%, and the P/E ratio has actually contracted by 4%.
Wilson believes that outside the most speculative corners of the market, profit growth basically provides a reasonable basis for price increases. Wilson emphasizes:
Surprisingly, even though Q1 earnings growth has been strong, forecasts for the next two quarters are actually accelerating.
In terms of nominal pricing, changes in semiconductor product prices are also worth watching.
Since the mid-1990s, the US semiconductor and hardware PPI index has been in a long-term deflationary trend, until a turning point in the past 12 months.
The year-on-year growth in Korea's semiconductor export prices in the past 9 months was described by Wilson as "jaw-dropping".
However, Wilson also highlighted a key counterpoint: If AI infrastructure and energy sectors are excluded, the S&P 500's EPS forecasts have seen almost no growth since the start of the year.
In other words, the current profit-driven logic is highly concentrated; the market is essentially betting on a single theme.
The market begins brewing a "second narrative"
Wilson believes there are increasing signs that the market is accumulating conditions to gradually move away from the single-theme trading pattern.
At the policy level, Federal Reserve Chairman Walsh has just taken office for his first week.
Wilson cites historical data that since 1970, among the six Federal Reserve chairs, Bernanke and Yellen saw about 10% market retracement in their first year, while the other four experienced retracements from 20% to 36%.
At the earnings pace level, the second derivative of EPS growth is expected to slow starting this summer. Combined with the effect of the "Big Beautiful Act" on capital expenditures fading, there could be a significant step-down in capex after summer.
At the geopolitical level, the framework for an Iranian ceasefire agreement has taken shape, including a 60-day truce extension, reopening of the strait, mine clearance, and gradual lifting of blockade or sanctions.
Wilson and Bloomberg macro strategist Michael Ball both emphasize that once this framework is established, it will be genuine easing of tensions.
If the Iran deal comes true, the AI-energy barbell strategy faces challenges
Bloomberg macro strategist Michael Ball outlined the potential market trends after a US-Iran deal.
The dominant trade in the current market is simultaneously holding AI computing stocks with constrained capacity and energy stocks supplying the power, forming a "AI CapEx + Energy" barbell structure.
Once a credible Iran agreement appears, falling oil prices would cool inflation expectations, lowering yields and the US dollar, easing global financial conditions, with energy importers benefitting most prominently.
Michael Ball stressed this benefits emerging markets and European stocks, as well as wider value stocks and cyclical stocks relatively more.
Special attention should be paid to the European market. As Europe lacks energy independence, it can be said to be the biggest beneficiary of ending the Iran conflict. The current European capital expenditure cycle is underestimated, as supported by German fiscal spending data.
On the technical side, the volatility of US individual stocks is about 3.5 times that of the index, while Europe's is only about 50% higher, meaning the cost-effectiveness of capturing single-stock opportunities in Europe is relatively higher.
(A comparison of the trends in single-stock and index volatility, the first chart is US, the second is Europe)
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