Goldman Sachs: De-leveraging Phase for Tech Stocks Nearing End, Short-Term Catalyst for Reversal Lacking

BlockBeats News, July 19th, Goldman Sachs Partner and EMEA Head of Hedge Fund Business Mark Wilson stated that the current round of momentum trading sell-off has lasted for 17 trading days. The momentum factor of US stocks has retraced 28% from its peak, while the momentum factor of the technology, media, and telecom sectors has dropped by 40%, marking the fastest and deepest retracement on record.

Looking at specific markets, the KOSPI has fallen 27% from its high, US AI beneficiary stocks have retraced approximately 25%, global semiconductor stocks have dropped by 36%, and European semiconductor stocks have declined by 23%. Goldman Sachs data shows that the volatility of high-beta momentum portfolios is about 10 times that of the S&P 500 Index, while the average implied volatility of individual stocks has reached 2.8 times that of the index.

Wilson believes that the current sell-off is mainly due to crowded positions, concentrated leverage, and deleveraging, rather than macroeconomic or corporate profit deterioration. US banking loan and consumer data continue to grow, and both TSMC and ASML have released positive business signals, yet their stocks still dropped after the earnings reports.

He tends to think that the unwinding process of the momentum factor is nearing its end, but in the short term, there is still a lack of catalysts to immediately reverse the market trend. The tech sector's valuation remains high, and a new leader may need to wait for further clarity after digesting the second-quarter earnings.