A bearish trade is looming for US equities, Goldman Sachs says

Goldman Sachs managing director Scott Rubner is warning that the US equities market may be heading for a bearish period. In a note released Wednesday, Rubner, a global markets and tactical specialist at the investment bank, said that while he had been optimistic about the market’s outlook for 2025, the signs of a negative shift are becoming more delineated.

Rubner has characterized the current market dynamics as “crowded” with participants. This includes retail traders, 401(k) inflows, corporate allocations, and a seasonal influx of capital at the start of the year. 

“Everyone is in the pool,” the director said, “The flow demand dynamics are quickly changing, and we are approaching negative seasonals.”

Stock market could turn bearish

The S&P 500, which has seen a 3.11% gain since the start of the year, has remained surprisingly resilient despite concerns like President Donald Trump’s tariffs. 

On Thursday, however, the S&P 500 went down more than 16%, reacting to the inflation report from the Federal Reserve that was more “concerning” than expected.

Rubner’s analysis explained that the demand for stocks and the “buy the dip” mentality is fading. He added that Commodity trading advisers (CTAs) could potentially sell approximately $61 billion worth of US stocks if the market heads lower in the near future. 

These same traders, he argued, would buy only around $10 billion worth of stocks in a bullish scenario. This has opened room for a market crash.

Rising inflation and policy uncertainty

Investor focus is now squarely on inflation data, particularly after January’s surprise consumer inflation print sparked concerns about the likelihood of an interest rate cut in the near future. The numbers have added to the growing concern about price pressures in the US economy, with inflation expectations rising and putting pressure on the Federal Reserve’s policy stance.

As markets brace for another inflation report, traders are keenly awaiting the release of the Producer Price Index (PPI) on Thursday at 8:30 AM ET, which tracks wholesale prices at the company level. 

President Trump has implemented a 25% tariff on all steel and aluminum imports into the US. More tariffs are expected to be announced during President Trump’s meeting with India’s leader Modi later on today, which could further intensify inflationary pressures.

Last Tuesday, Federal Reserve Chairman Jerome Powell stated that the central bank is in no rush to cut interest rates. Powell’s comments came after his session with the Senate Banking Committee, where he reiterated the Fed’s “cautious” approach to monetary policy as inflation numbers continue consolidating above the central bank’s 2% target.

While market uncertainty persists, roughly 70% of S&P 500 companies that have reported earnings thus far have surpassed analyst expectations. Notably, Robinhood shares soared 7% pre-market trading, following a strong fourth-quarter profit report, signaling continued strength in some sectors of the market.

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