Is the 'Santa Rally' coming? Goldman Sachs and other Wall Street institutions are bullish on a year-end rebound in US stocks, but inflation pressure may erupt in Q1 next year.

BlockBeats news, November 14, Goldman Sachs, Morgan Stanley, and JPMorgan have successively signaled a year-end rebound in US stocks, believing that the recent sharp sell-off, valuation pullback, and concentrated position reduction by hedge funds have created conditions for a short squeeze in the market. Goldman Sachs pointed out that market positioning has been substantially cleared out, global equity valuations have returned to around the 35-year historical average, selling pressure is nearing exhaustion, and a "Santa Claus rally" may arrive at year-end.

Morgan Stanley data shows that hedge funds' net positioning in the AI sector recently turned underweight for the first time since 2023; JPMorgan, meanwhile, advised investors to buy on dips.

However, Goldman Sachs warned that the six-month annualized growth rate of global manufacturing import price inflation has reached about 24%, exceeding the inflation peak during the pandemic, and the annualized increase in global producer prices has also reached about 11%. Since it usually takes 6 to 12 months for upstream costs to pass through to the consumer side, inflationary pressure may become concentrated in the first quarter of next year, forcing the Federal Reserve to maintain a tightening stance.

Goldman Sachs believes that if the year-end rebound drives a re-easing of financial conditions, it may instead weaken the Fed's rationale for waiting and observing, and could even front-load future gains. Its strategists reminded investors to be alert to a market pullback after the year-end revelry.