Goldman Sachs partner Mark Wilson noted that after a strong rally in Q2, the US stock market has entered a sideways trend, currently facing three major headwinds: historical patterns around midterm elections, fully long positions by quantitative funds, and a "triangle chokehold" from energy, bonds, and equities. He is bullish on four investment themes: AI infrastructure leaders, commodities and related stocks (especially copper), German equities, and large banks.
Wilson believes that historical data for midterm elections shows a median return of 0% for US equities from early August until the election, and the market has been trading according to this pattern. Quantitative trend-following funds and volatility-targeting strategies remain near fully long, facing selling pressure if prices decline. Geopolitical factors are pushing up oil and gas prices, which in turn drives bond yields higher, ultimately suppressing equity valuations, forming the "energy-bond-equity" triangle chokehold, which is the core contradiction in the current market.
Among the four favored themes, Wilson sees continuously strengthening fundamentals in AI infrastructure, with tech giants accelerating capital expenditures. However, he suggests waiting for yields to stop climbing and for the market to look ahead to 2028. In commodities, he is particularly bullish on copper, noting its strong trading performance and the fact that related stocks have not yet been re-rated. German equities are attractive because their index composition has shifted towards defense, electrification, AI, and technology, and pension reforms could turn German savers into buyers. Large banks are benefiting from sustained growth in capital markets fee income and AI-related financing demand, as well as potential easing of the regulatory environment.
Goldman Sachs Partner Mark Wilson: U.S. Stocks Face Triple Headwinds, Bullish on AI Infrastructure, Commodities, German Equities, and Large Banks
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Disclaimer: This content reflects the author's personal views only and does not constitute investment advice.
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