Goldman Sachs The Markets Fade the S&P 500 rally?
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May 23, 2025 
Brian Garrett, Head of equity execution at Goldman Sachs, dives into the recent S&P 500 surge and whether it can be sustained. He discusses a shift in investor sentiment from fear to optimism and the implications of rising interest rates. Garrett examines the delicate balance between bond and equity markets, considering potential shifts in investor strategies. He also introduces innovative hedging strategies and analyzes how employment data might affect market sensitivity. It's a fascinating look at the current landscape for smart investors.
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S&P Rally Seems Overextended
- The S&P 500 rally appears overextended due to systematic demand running out of incremental capital.
- Fundamental buyers likely see value 4-5% lower, creating a gap between market price and true demand.
Sentiment Shift on Recession Risk
- Market sentiment shifted dramatically from recession fears to optimism within a month.
- Half of survey respondents downgraded recession probability from 50%+ to below 30%.
Divergence Between Soft and Hard Data
- Soft economic data can't get worse while hard data remains stable, creating uncertainty.
- Market now questions if soft data will improve or hard data will worsen, affecting recession outlook.