Goldman Sachs Sees Opportunity for Stock Market Growth Before Midterm Elections

According to Goldman Sachs, investors don't need to wait for the US midterm elections to participate in the market. Mark Wilson, a partner at Goldman Sachs, believes that the global stock market is facing an increasingly clear opportunity for growth before the end of the year.

The current market pricing has already accounted for the risk of stagflation, and with a more moderate 'Goldilocks' economic scenario emerging, investors can take on risk assets without waiting for the elections. Recent market trends are confirming this optimistic outlook, as the 'fear of missing out' (FOMO) driven by AI-related stocks is back in the market.

The Nasdaq index and other AI-themed assets have broken through their three-month consolidation period and have seen a historically large surge in the second quarter. Meanwhile, US Treasury yields are rising again, but this time primarily due to strong PMI data indicating robust nominal economic growth, which has allowed the stock market to maintain its upward trend despite volatile yield movements.

Despite concerns that the prolonged seven-month rise in US 10-year Treasury yields could eventually weigh on stocks, Goldman's analysis suggests that a solid foundation for year-end stock rebounds is being built through improvements in inflation, economic growth, and corporate profits. The relief of easing inflationary pressures combined with the AI-driven contractionary effect.

Meta's Muse product has marked the beginning of the trend towards a shrinking economy in consumer goods and services. Goldman Sachs' research on 'commercial proxy AI era' shows that technological advancements are significantly reducing costs at the consumption end, making this a more important contractionary driver than declining energy prices.