Market Has Ignored Worsening Macro

Negative asymmetry for equities near-term

Goldman's macro strategists are not buying the summer melt-up thesis and are sounding more cautious than in a while.

"We are tactically neutral in our asset allocation (OW cash, N equities/credit/bonds, UW commodities). We still expect a worsening growth/inflation mix in 2H and elevated risk appetite increases risk of disappointments. The combination of elevated valuations and potentially more mixed macro data points to a modestly negative asymmetry for equities near-term. While equity tail risk has continued to decline, the potential for drawdowns has reset less than the likelihood of a rally recently. The US business cycle may yet face headwinds from tariffs in the second half of the year."