Goldman Sachs continues to cool down the US stock market

Is the US stock market going to pull back this week? Goldman Sachs is back to cool down the US stock market, saying it's ready for a pullback this week.

The reasons they gave are:

First, the current total leverage ratio of US stocks is as high as 310%, ranking in the 98th percentile over a five-year period. This means that for every $3.10 in stock positions in institutional accounts, only $1 is their own, and the remaining $2.10 is borrowed. Moreover, this leverage ratio is higher than it was 98% of the time over the past five years. At the same time, the net leverage ratio is only 75%, at the 21st percentile over a one-year period, indicating that while there is a lot of long positioning, short-selling pressure is also not low, and market confidence in the upside is not very firm.

Second, from a technical perspective, this round of gains was driven by CTA quant fund buying and short covering, with CTAs buying $70 billion. However, they expect next week's buying amount to drop to $23 billion, and the demand for short covering is also decreasing.

Finally, they believe that the closure of the Strait of Hormuz over the weekend has also cast a shadow over the negotiations, so they think the timing for a pullback is ripe.

But, but. They also admit that the market outlook is very difficult to grasp and may replicate the performance seen after last year's tariff war.

So, in summary, I think short-term risks exist. Those looking to enter the market should be more cautious, not aggressive, and take it slow. However, the long-term trend is still upward. So, if a good pullback occurs, that would be a good opportunity to get on board.

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