<p>Under the backdrop of inflationary pressures, concerns about debt sustainability, and the dominance of technology stocks, Tony Pasquariello, head of Goldman Sachs' hedge fund business, shared 16 charts that reveal the current market state:</p>
<p><strong>The risk of inflation rebounding has been priced in by the market in advance, long-term interest rates remain high, the U.S. dollar and U.S. Treasury bonds show a significant divergence, earnings growth is dominated by tech giants, and explosive performances in sectors such as nuclear energy and defense create an investment environment that is &#34;tricky, uneven, but full of opportunities.&#34;</strong></p>
<h2>The Market Has Priced in Inflation Rebound in Advance</h2>
<p>Despite recent encouraging trends in inflation, Goldman Sachs predicts that the implementation of tariffs will cause core PCE to rise from the current 2.5% to 3.6% by the end of the year. However, the market seems to view this as a one-time event.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b5ad5fb5-0e66-4066-9509-77d4fe92b896.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b5ad5fb5-0e66-4066-9509-77d4fe92b896.jpeg"/></p>
<p>The 5-year forward inflation breakeven has remained within a stable range since spring 2022, indicating limited market concern about a long-term inflation recovery.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7217224d-060c-4c11-a99d-6d848294ddc8.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7217224d-060c-4c11-a99d-6d848294ddc8.jpeg"/></p>
<h2>Concerns About Debt Sustainability Remain</h2>
<p>Most of the U.S. nominal interest rate curve has remained within a similar range over the past few years, but long-term interest rates remain a focal point.</p>
<p>Although the 30-year U.S. interest rate has eased somewhat in recent weeks, Goldman Sachs believes that the market may continue to remain highly vigilant during each long-term Treasury auction cycle.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/41089978-1756-4a55-809a-d4dc62032541.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/41089978-1756-4a55-809a-d4dc62032541.jpeg"/></p>
<h2>Significant Divergence Between the Dollar and U.S. Treasuries</h2>
<p>A core challenge facing the dollar is that it remains relatively expensive across a range of valuation models.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d8482baf-f22d-4f4d-a0d9-ddd73a0f3690.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d8482baf-f22d-4f4d-a0d9-ddd73a0f3690.jpeg"/></p>
<p>This may explain why there has been a divergence between the 30-year U.S. real interest rates and the dollar's performance.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/dae31da2-45b6-47a7-89bb-0c1b62032348.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/dae31da2-45b6-47a7-89bb-0c1b62032348.jpeg"/></p>
<h2>The Real Estate Sector Faces a Complex Outlook</h2>
<p>U.S. homebuilder stocks present a confusing picture. On one hand, the risks of long-term interest rates and the weak technical supply-demand dynamics in the U.S. housing market pose threats to these stocks; on the other hand, despite historical volatility and significant declines, the long-term bullish trend remains impressive, showcasing the resilience and complexity of this sector.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2de54be8-5755-410b-820b-96800aefc126.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2de54be8-5755-410b-820b-96800aefc126.jpeg"/></p>
<h2>Defense Stocks and Nuclear Energy Stocks Surge</h2>
<p>Global defense stocks have performed particularly well, with Goldman Sachs' South Korea defense stock basket rising 127% year-to-date, and defense stocks in Europe and Japan also showing strong performance.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4aabad1a-1565-41d4-9feb-ace4d6ef8bda.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4aabad1a-1565-41d4-9feb-ace4d6ef8bda.jpeg"/></p>
<p>At the same time, a uranium/nuclear power themed investment basket composed of 20 global stocks has also shown a remarkable upward trend.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/747af47b-e2de-421a-8956-f1ff297b5d8c.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/747af47b-e2de-421a-8956-f1ff297b5d8c.jpeg"/></p>
<h2>Tech Giants Lead Earnings Growth</h2>
<p>Global technology companies have demonstrated exceptional earnings growth compared to non-tech companies.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8a55b316-0238-4a9a-a3ec-30d83f3c0013.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8a55b316-0238-4a9a-a3ec-30d83f3c0013.jpeg"/></p>
<p>In particular, the earnings growth of the Mag7 (the seven major tech giants in the U.S.) stands out compared to the other 493 companies.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2e07c29e-387a-44ff-bda3-53bcd5baf07e.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2e07c29e-387a-44ff-bda3-53bcd5baf07e.jpeg"/></p>
<p>The capital expenditures of tech giants have shown significant changes since the emergence of ChatGPT, with market consensus expecting this growth to continue.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7104def2-0b40-4bc9-80cd-a63d4c44ace1.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7104def2-0b40-4bc9-80cd-a63d4c44ace1.jpeg"/></p>
<p>The gap between AI leaders and laggards in the U.S. continues to widen. As a Goldman Sachs executive noted, AI deployment and harvesting seem to follow a trajectory of &#34;slow, slow, slow, then suddenly accelerate.&#34;</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ed317820-484a-4709-924f-eaf06434925b.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ed317820-484a-4709-924f-eaf06434925b.jpeg"/></p>
<h2>Market Pricing: The Power of Buybacks and Systematic Liquidity</h2>
<p>Despite a significant increase in recent issuance activities, the underlying reason is that companies are engaging in large-scale buybacks.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/79d67b3c-5220-41cc-a5ec-5fa10c4b7d1a.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/79d67b3c-5220-41cc-a5ec-5fa10c4b7d1a.jpeg"/></p>
<p>The amount of index futures held by the global systematic trading community is at a moderate level (5 out of 10), indicating that speculative positions no longer provide strong support as they did six weeks ago, but have not yet become a resistance.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ad896ecb-0388-4794-b046-1a42bf04ba2b.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ad896ecb-0388-4794-b046-1a42bf04ba2b.jpeg"/>
May witnessed the largest scale of global net stock purchases in history (with a slowdown in June but still leaning towards net purchases), indicating that the initial wave of risk-taking by hedge funds has passed, but it may extend further.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b0d714f0-717a-4b1c-a731-1f7e599dcd08.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b0d714f0-717a-4b1c-a731-1f7e599dcd08.jpeg"/></p>
<h2>Outstanding Performance of Value Storage Tools</h2>
<p>In terms of year-to-date total return and Sharpe ratio, value storage tools (gold, Bitcoin) have performed excellently. U.S. high-yield bonds have provided a surprisingly high Sharpe ratio (and significant diversification).</p>
<p>It is noteworthy that the U.S. stock market has underperformed its global peers (developed markets and emerging markets), and U.S. tech stocks have also shown unexpectedly slow performance since the beginning of the year.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4850461d-192d-405c-a96f-e732e4bed26a.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4850461d-192d-405c-a96f-e732e4bed26a.jpeg"/></p>

<p>The risk of inflation rebounding has been anticipated by the market, long-term interest rates remain high, there is a significant divergence between the US dollar and US Treasury bonds, profit growth dominated by tech giants, and explosive performance in sectors such as nuclear energy and defense... all of these create an investment environment that is "tricky, uneven but full of opportunities."</p>

- Goldman Sachs' Tony Pasquariello highlights the current market state amid inflation pressures and debt sustainability concerns, presenting a "tricky, uneven but opportunity-filled" investment environment.  
- Key observations include early market digestion of inflation risks, high long-term rates, and significant performance in defense and nuclear sectors, alongside tech giants leading profit growth.  
- Despite a complex outlook for real estate, the overall market shows resilience, with substantial corporate buybacks and strong returns from value storage tools like gold and Bitcoin.

Regarding U.S. stocks, U.S. bonds, and the U.S. dollar, these are the 16 charts that Goldman Sachs is most focused on