Goldman Sachs: Unfazed by war and AI panic, the US stock pullback is an "entry" opportunity

Goldman Sachs strategists said on Wednesday that investors should view any pullback in the stock market as a buying opportunity rather than believing a bear market has begun.

In a report led by Peter Oppenheimer, the team wrote that, despite significant resistance from risk assets due to concerns over the Middle East war and disruptive impacts of artificial intelligence (AI), the resilience of economic fundamentals and strong corporate earnings growth suggest that the depth and duration of this correction will be limited.

Oppenheimer stated:

“Given current valuation levels, we believe there is a higher risk of a market pullback, but we expect this to present a buying opportunity, with a relatively lower risk of a prolonged, deeper bear market.”

The global stock markets have been volatile at the start of this year. Initially, fears that AI could disrupt business models led to widespread sell-offs across many sectors; then, the outbreak of the Middle East war further impacted markets. However, these strategists pointed out that, at the index level, the overall market remained relatively stable until recently, with trading characterized mainly by rapid sector and individual stock rotations and increased volatility.

The Goldman Sachs team said that as the rally expanded from a few sectors to different regions and investment styles, the overall valuation of global stocks has risen above average levels. Compared to the past 20 years, valuations across all industries are in the expensive range. Coupled with a historically strong US-led bull market, this makes the stock market more susceptible to potential shocks, such as the threat of war in Iran impacting oil and natural gas markets.

Oppenheimer stated:

“The longer this uncertainty persists, or the more severe the shocks to energy supply, the higher the market’s concerns about economic growth and inflation risks.”

“Most geopolitical shocks in recent years have not caused long-term market impacts.”

Additionally, Goldman Sachs Chairman David Solomon, speaking at an event in Australia, expressed surprise at the market’s “moderate” reaction to the Middle East conflict, and said it would take several weeks to better understand how the situation develops. He said:

“There are too many unknowns right now, making it difficult to speculate.”

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