The simple part is over! Goldman Sachs trading desk: We are in "the final stage of systemic support."

The rebound in US stocks since early April is approaching a critical juncture. The Goldman Sachs trading desk warns that the systematic buy-side forces driving this round of gains have entered the "final stage," with the market shifting from passive momentum chasing to a new pattern requiring proactive judgment of fundamentals.

Rich Privorotsky, Head of Goldman Sachs Delta-One business, pointed out in a client report on Tuesday that as the buying room for Commodity Trading Advisor (CTA) models narrows and the incremental contribution of volatility control strategies gradually weakens, the systematic forces that previously supported the US stock rebound are fading. "Mandatory buying has basically been completed, and the easy part of the rally is over."

Meanwhile, the credit market failed to further narrow spreads during the latest round of upward movement. Implied volatility also showed the unusual signal of "spot prices rising and volatility rising together," indicating that the internal structure of the market is becoming fragile.

As this warning is issued, news of the extension of the Middle East ceasefire agreement also provides temporary support to market sentiment, with US stocks still rising. But Privorotsky believes that "the ceasefire currently seems more like a makeshift solution than true reconciliation"—the US is extending the truce while maintaining the blockade, leaving the situation in a stalemate of "no war, no peace." The rising energy costs are gradually being passed on to businesses and consumers, becoming a latent pressure hanging over the market.

Systematic Buying Fades, Market Enters More Difficult Phase

Privorotsky's assessment of the current technical landscape is the core warning most worth noting in this report.

He pointed out that, although the theoretical model in the options market suggests the market is currently in a relatively stable range—with sellers providing plenty of liquidity and prices pulled back into densely traded regions—in reality, price volatility has been much more active than this background suggests, with large amounts of call options still being continuously bought. In other words, theoretical "stability" has not truly suppressed the market's restlessness.

What is even more worth being alert to is the change in the market's internal structure. Recently, some momentum strategies' short targets and stocks with poor fundamentals have experienced abnormal surges. Privorotsky interprets this as a typical signal: with the market at a high level and fewer stocks rising overall, investors are starting to dig for stocks that haven't rallied yet, even if their quality is very poor. This is often a precursor to overall portfolio positioning becoming chaotic.

He summarizes that, while the market still has support from profit growth and economic fundamentals are also fairly solid, investors are starting to ask much tougher questions about the ultimate valuation level of stocks and their forward P/Es. "If you are still chasing gains now, you must believe that favorable outcomes in the future are not only highly probable but also must be sustainable."

Ceasefire Continues, but Geopolitical Risks Remain

Privorotsky pointed out that the core logic of the current situation has gradually become clear: Trump is not seeking a substantive military escalation, and the conflict is more likely to be a long tug-of-war between blockade and diplomatic mediation. He describes the current situation as a game between two scenarios—either both sides slowly consume amid the blockade, or some form of easing arrangement is quietly reached even as negotiations drag on.

According to prediction market platform Polymarket, the probability that the Strait of Hormuz resumes normal operations before the end of May is about 60%, indicating the market overall still tends to bet on the situation ultimately easing rather than a structural disruption.

However, the economic damage caused by rising oil prices is beginning to materialize in the real sector. Capital One's Q1 earnings report shows credit loss provisions jumped 72% year-on-year to $4.07 billion, with CEO Rich Fairbank explicitly citing Middle East conflict as an uncertainty factor for consumer prospects. Data from digital bank Chime also shows that its customers' fuel spending in March surged 25% from the previous month.

Corporate Performance Diverges, Energy Cost Becomes New Variable

Overall, corporate earnings performance is still good for now, but the impact of rising oil prices is starting to carve out clear boundaries among industries.

The airline industry stands at the forefront. United Airlines lowered its Q2 and full-year guidance below market expectations, with fuel costs the main drag; Lufthansa reportedly plans to cut about 20,000 summer flights to save on fuel expenses. UK homebuilder Crest Nicholson also lowered its annual guidance, with its stock plummeting nearly 40% at one point. Management admitted that buyers have become much more cautious and are unwilling to transact at current prices.

Despite the divergence, there are also some highlights. ABB reported strong, better-than-expected orders, providing strong support for the themes of electrification and data center construction; semiconductor equipment maker ASM outperformed expectations in Q1 and raised guidance, giving hardware bulls a shot in the arm. Adobe announced a $25 billion stock repurchase plan extending to April 2030—interpreted by the market as management's endorsement of the company's value, though such a long buyback period is somewhat awkward amid ongoing doubts about the long-term value of the software industry.

On the whole, rising energy costs are eroding corporate earnings and consumer purchasing power, while the retreat of systematic buying means the "easy money" has already been made. The ceasefire agreement may soothe sentiment temporarily, but it can't eliminate the deep-rooted geopolitical standoff. The direction of the market from here no longer depends on the inertia of passive funds, but on whether investors can proactively judge between fundamentals and risks.

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