Will the upward trend continue in the future?! Investors should obediently follow the guidelines set by the FRB = GS.

The global economy is showing signs of slowdown, with several of the world's largest central banks unexpectedly turning more dovish than the market expected. Following the FRB, the Central Bank of China has also unveiled its own easing measures. Sometimes, there was very strong technical demand for US stocks last week, and this week there is significant bullish demand for China and emerging markets, showing the market some kind of "animal spirits".

Tony Pasquariello, a top trader at Goldman Sachs and head of hedge fund research, stated in his latest report that recent risk assets are enjoying two tailwinds. These are the sharp drop in US short-term interest rates and the yen's sideways movement. On the other hand, the same individual also expressed concerns.are enjoying two tailwindsthata sharp drop in US short-term interest rates and the yen's sideways movementOn the other hand,the same individual also expressed concernsHe is considering whether the influence of the former is beginning to decline, whether the latter is also reversing after the LDP leadership election.

Earnings season and the US presidential election.
Mr. Pasquariello stated in the report that the main trend in the market remains upward,believing that investors should obediently follow the policies set by the Fed and other central banks without going against them.At the same time,earnings season and the US election.Pointed out that there are two notable additional factors.

● In the US corporate earnings, the core earnings season is just two weeks away. This will have a very significant impact. It includes both the third-quarter earnings where major tech companies can maintain their strong performance, and the guidance for the fourth quarter. The market is expecting an 11% increase.

● Regarding the US presidential election, traders may not be as concerned about the impact of the US election as investors had expected. This may reflect the market's view of the two most likely outcomes: Harris + a divided Congress, or a full Republican victory.

US high-tech stocks
This week, semiconductor stocks have risen, and the Nasdaq 100 is only about 3% below its all-time high.

Goldman Sachs' TMT specialist, Peter Callahan, stated that investors have generally been reducing their exposure to high-tech stocks recently, strengthening their preference for diversified investments and defensive assets against uncertainty. Particularly this week, with the rise in semiconductor stocks and the market creating a more "two-sided" scenario on the topic of Generative AI, this trend is notably evident.

Amid the extension of the AI boom, a series of US market stocks related to the expansion of electricity demand experienced volatility this summer. However, Goldman believes there is a broader and deeper story. From electric vehicles to cloud computing,Market interest in this theme is once again on the rise.And Goldman pointed out.

Valuation of US stocks
Mr. Pasquariello has raised a series of questions that the market is discussing.

For investors with such questions, the chart below shows the price-to-earnings ratio (PE) at the beginning of each of the past 8 easing cycles over the past 40 years. Blue represents the year after the Fed's first interest rate cut, with no recession occurring and the S&P 500 performing very well. Grey represents scenarios where a recession occurred and the S&P 500 performed poorly.

Investors,It is noteworthy that while the current forward PE is 22 times, the average PE in non-recession scenarios in the past was only 11 times.should take note of this.

Japanese market
Mr. Pasquariello stated that the impact of Japan's election results seems somewhat mixed, surprising that it was not very anticipated before the results were revealed. This outcome is proven by the sharp increase in short-term Japanese government bond yields and the strengthening of the yen.

Pasquariello argues that investors need to determine whether to cope with the volatility in this market. As one Goldman Sachs client puts it,Negative sentiment from foreign investors is expected to continue for a while.It is clear that foreign investors were significantly net sellers in the first two weeks of September.

According to Mr. Pasquariello's view, the Japanese market is sometimes straightforward, but it is not in that kind of environment right now. However, at the thematic investment level in particular, he believes there are many opportunities in the market correction phase.

China's policy change
The People's Bank of China (PBOC, China's central bank) made a comprehensive interest rate cut this week, and at the political bureau meeting in September, the missing part of fiscal policy became clear. Mr. Pasquariello pointed out that the policy shift has been made and a new trading cycle has begun.

Bitcoin
Once the final statistics for the third quarter of bitcoin are released, it has again become a healthy quarter.

During this time, the price movement of bitcoin after a 50bp rate cut was consistent with its characteristic as a "liquidity sponge". From a longer-term perspective,Bitcoin has risen by 50% this year, with a sharp ratio of 1.0.