Goldman Sachs Survey: Institutions are extremely bullish on the seven giants of U.S. stocks, while bearish sentiment on the dollar reaches a ten-year high!

According to the Zhitong Finance APP, Goldman Sachs' latest QuickPoll for institutional clients shows that investor confidence in the U.S. stock market—especially in the "seven giants" large tech stocks—is rapidly increasing, while bearish sentiment towards the dollar is approaching historical peaks. This monthly quick survey, conducted from July 1 to 2, received 800 valid responses, indicating that risk appetite has returned to the levels seen in January 2025 when the "American exceptionalism" dominated the market; however, funds are now more dispersed, with continuous reductions in dollar assets and simultaneous inflows into developed markets such as Europe.

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Oscar Ostrand, Head of Content Strategy for Goldman Sachs' Global Banking and Markets Marquee platform, pointed out that one of the most significant changes in recent months is the rare decoupling of the dollar from U.S. stocks. Since January 2016, there have only been three instances where "bearish dollar + bullish U.S. stocks" simultaneously dominated the mainstream, with the last occurrence in January 2024.

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One of the core reasons for the recent dollar weakness is concerns about the U.S. fiscal outlook: as of July 17, the dollar has depreciated by 11% against the euro and 6.4% against the yen this year; meanwhile, the ratio of U.S. government debt to GDP is approaching its highest point since World War II. The survey shows that the ratio of those bearish on the dollar to those bullish exceeds 7:1, marking the most extreme instance in nearly a decade.

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On the other hand, 51% of the surveyed institutions are optimistic about the S&P 500, while only 32% are bearish. Cross-asset sales trader Brian Garrett reminds us that the traditional logic of "economic improvement → stock market rise → dollar should strengthen" seems to be failing, indicating a potential misalignment in the market.

Why are investors optimistic about U.S. stocks? Ostrand listed three main drivers: first, the Federal Reserve's dovish shift, with interest rates declining faster than expected, directly boosting stock market valuations; second, the continued rise of AI concepts, with the U.S. holding the global tech leadership, particularly the "seven giants"—66% of respondents already hold or plan to further increase their positions; third, the geopolitical premium has receded, although trade and geopolitics remain focal points, the market has viewed a 10%-15% effective tariff as the new normal, significantly easing concerns about global supply chain disruptions. Garrett added that concerns about the U.S. "withdrawing from global trade" that existed in early April have now largely dissipated.

However, the overly consistent positions also pose a risk of reversal. In the July quick survey, respondents' bullish sentiment towards risk assets, the S&P 500, and gold was significantly higher than historical averages, while expectations for oil and the dollar were below average Osterlund admitted, "An extremely one-sided consensus has made the market fragile, and any minor data could trigger a rapid adjustment." Garrett also pointed out that these beliefs have not yet faced price challenges, but "one or two unexpected data points are enough to shake the consistency of trades."

In the face of potential herd behavior, Garrett suggested looking for low-cost hedging tools to guard against the "deep-rooted consensus." For example, betting on the simultaneous decline of the S&P 500 and the euro could hedge against the two mainstream expectations of "American exceptionalism" and "dollar weakness."