Goldman Sachs told clients Monday that market breadth in the S&P 500 has fallen to its lowest level since the dot-com bubble, even as AI stocks keep the index steady. Strategist Ben Snider said the median S&P 500 stock trades 16% below its 52-week high, while Goldman's sentiment indicator, which tracks how heavily U.S. equity investors are positioned in stocks, has dropped to -0.9, matching its March lows. Snider wrote that together these factors indicate the potential for both broad market upside and a catch-up from recent laggards if macro uncertainty declines. The S&P 500 has returned 14% so far this year, yet its forward P/E ratio has fallen from 22 times to 19 times, in line with its 10-year average, a move Goldman attributes partly to rising interest rates and investor concern that the AI spending boom is helping companies earn more than is sustainable. According to the bank's valuation model, the current multiple is consistent with a return on equity of 22%, which Snider said is high by historical standards but 2 percentage points below the current level, showing the market is rightly skeptical that today's profitability will last. Goldman also said its long/short value strategy has returned more than 25% since the middle of last year but expects it to do less well from here, with Snider advising investors to focus on generating alpha in stocks where they have differentiated views on long-term growth prospects.
Goldman Sachs Group IncGoldman's strategist authored the breadth/sentiment analysis; no company-specific financial event, just market commentary.
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