Goldman Sachs warns that bear market rebounds are the norm, with uncertainty dominating market trends.
Over the past two weeks, US stocks have rebounded significantly, fully recovering all losses since April 2. Goldman Sachs analyst Peter Oppenheimer recently stated in his research report that the recent sharp stock market rebound may be a typical bear market rally, and the current market environment is challenging for stock investors.
Oppenheimer believes that the biggest driver of the current market is uncertainty, and investors have not truly become bullish or bearish:
"The asymmetry of stock investment is poor. Sharp rebounds in bear markets are the norm, not the exception."
"If US tariff policies are quickly withdrawn with minimal lasting economic damage, this indeed suggests limited downside risk. However, at current valuation levels, upside potential is equally limited."
This market environment makes investment extremely difficult, with decision-making clouded by ambiguous headlines. Market participants must choose between chasing a weakening rebound and risking exiting too late, or completely missing another squeeze-driven rally.
Challenging Market Environment Forces Investors to 'Buy with Pinched Nose'
Many investors were forced to sell risk assets in early April due to unclear tariff prospects, but are now buying during the rebound, with few investors having sufficient positions to fully benefit from this performance.
Nomura Securities cross-asset strategist Charlie McElligott described the current situation as "an unpleasant stock trade and a scenario no one wants".
McElligott confirmed in a report that the phenomenon of "being forced to buy back positions with a pinched nose" is playing out in stock index options, "despite most investors' aversion to future macro growth prospects".
Historical Data Suggests Rebound May Be Approaching Limit
Based on data, this rebound, one of the most intense intra-month rallies in April, may have exhausted its upward potential.
According to media statistics, since 1980, global stocks have experienced several bear market rebounds, averaging 44 days with a 14% gain. Although this year's global stock decline cannot be officially termed a bear market, prices have risen 18% from the intraday low on April 7.
Academy Securities macro strategist Peter Tchir stated:
"Interest rates and risk assets will continue to be driven by news headlines. Policies and trades will take turns driving the market."
Investor Sentiment and Positioning Already Crowded
Goldman Sachs Managing Director John Marshall wrote in another report that financing spreads - measuring the demand for long positions through equity derivatives like swaps, options, and futures - have decoupled from recent stock market gains. "This indicates that macro investors have reduced stock positions during recent strength."
Marshall expects this week to be particularly volatile, as the US Federal Reserve meeting will be held, where "comments about June/July will be especially important".
Systematic investor buying is steadily increasing, providing support for the rebound. Goldman Sachs traders noted that systematic macro investor purchases rose to $51 billion last week, with an expected purchase of $57 billion this week.
"The total purchase size is not negligible, but not larger, as if signals quickly reverse, it would reduce the immediate speed of capital flow and volatility is higher than before."
Other buying flows supporting the rebound appear more tense. JPMorgan's tactical position monitor is currently in a neutral state, with a week-to-week variation showing "moderate position increase".
Hedge fund leverage has rebounded quarter-on-quarter, currently at the 96th percentile of long-term levels. Meanwhile, retail investors continue to increase risk positions.
JPMorgan's positioning intelligence team leader John Schlegel stated:
"Since 2017, retail investors have shown the strongest buying month in our data, purchasing both individual stocks and ETFs."
