Goldman Sachs strongly supports US stocks: Don't fear the impact of war and AI! Every pullback is a good buying opportunity.

According to the Goldman Sachs strategist team led by Peter Oppenheimer, investors should consider any pullback in the US stock market as a buying opportunity rather than a signal of the start of a bear market. In a report, the team stated that despite significant headwinds faced by risk assets from the Middle East conflict and concerns over the disruptive impact of artificial intelligence (AI), the resilience of the economic fundamentals and strong profit growth mean that the depth and duration of the pullback will be limited. Oppenheimer stated, "Given current valuation levels, we see a higher risk of a pullback in the market, but expect this to present a buying opportunity, with a lower risk of a more prolonged and deeper bear market." The trading level of the S&P 500 index is above its long-term average Global stock markets have experienced volatility at the beginning of the year. Initially, fears of the disruptive impact of AI on business models led to a sell-off in multiple sectors, including software. The market then came under pressure again due to the Middle East conflict. However, the Goldman Sachs strategists pointed out that from an index perspective, the market overall has remained relatively stable until recently, with rapid rotations and increased volatility between sectors and individual stocks being the main features. The strategists also added that the dispersion of stock returns globally among different regions and investment factors has led to valuations being above average levels, with all global industries relative to their 20-year historical average in expensive ranges. Combined with the exceptionally strong bull market led by the US, this makes the stock market more vulnerable to potential shocks, such as the threat posed to the oil and gas market by the Iran conflict. Oppenheimer stated, "The longer this uncertainty persists, or the more significant the impact on energy supply, the higher the market's perception of inflationary risks." However, he also added, "Most geopolitical shocks in recent years have not had a lasting impact on the market." Several major banks maintain their bullish stance on US stocks Despite the volatility in US stock markets triggered by the escalation of the situation in the Middle East, BTIG's Chief Market Technical Analyst Jonathan Krinsky sees this as an opportunity for investors to enter the market. Krinsky quoted an old saying, "When missiles fly, time to buy." He wrote in a report to clients, "Dramatic volatility caused by geopolitical events usually does not last long," and added that the market's chaotic behavior is "more likely a tactical buying opportunity at current levels rather than selling." Morgan Stanley and Standard Chartered Bank recently reiterated their bullish stance on the US stock market. The equity strategist team led by Mike Wilson at Morgan Stanley wrote in a report that historically, geopolitical risk events have not led to sustained volatility in US stocks, citing the average performance of the S&P 500 index in the months following such events as the basis. The strategists stated that the main bearish scenario from the latest Iran conflict comes from a significant and sustained increase in oil prices, which could disrupt what they believe is a strengthening business cycle. They noted, "Unless oil prices soar to historically significant levels and remain high, recent events are unlikely to change our bullish view on US stocks for the next 6 to 12 months." The strategy team set a target of 7800 points for the S&P 500 index by the end of 2026 in a research report released in January this year, stating that "multiple synergistic factors" are driving a rolling cycle recovery in the US stock market. The bank defines 2026 as a "broad-based stock market bull market within a rolling recovery" and advocates the return of market risk preferences from point to face, with multiple cyclical industries leading the second stage of the bull market. Standard Chartered Bank analysts also pointed out that US stocks can withstand the impact of the escalation of the situation in the Middle East, and investors can choose to buy on dips of 5%-10%. The bank's analyst Steve Brice stated that the market is relatively well digesting the unprecedented geopolitical shock from the Middle East tension, and the core investment logic remains to buy on clear dips. While acknowledging the rising uncertainty, Brice pointed out that the stock market could fall by 5% to 10%, presenting a buying opportunity. This analyst emphasized that the market is entering this period of uncertainty against a backdrop of strong fundamentals. He said, "We are actually in a 'Goldilocks economy' environment. Economic growth is exceptionally robust, and US inflation is indeed declining, albeit at a relatively slow pace. We expect the Fed to cut rates, and corporate earnings remain stable." However, if oil prices remain high, it could gradually erode this favorable economic environment. Brice said that investors are currently focused on assessing the potential magnitude of the retreat in different scenarios, "I believe this is the issue the market is struggling to figure out - how much of a retreat the market may experience in benchmark and tail-risk scenarios, and how to position investments accordingly." While closely monitoring developments, Brice still maintains his preference for risk assets. He described the current environment as "likely to be a temporary phase overall, although it is very different from any situation we have experienced before." He also acknowledged that if the situation worsens, one must remain flexible and willing to adjust investment positions. This analyst also emphasized that this situation differs crucially from past military interventions in the Middle East. He pointed out, "Previous military actions in the Middle East usually involved ground forces and were able to control the situation relatively quickly. This time, the situation is very different, with a significantly higher risk of retaliatory actions in the Middle East." Deutsche Bank pours cold water: Beware of bottom-fishing halfway up the mountain However, Deutsche Bank issued a warning against adopting a "buy on dips" strategy in the face of the ongoing Middle East conflict, cautioning investors to beware of "bottom-fishing halfway up the mountain." The bank believes that the key question this week is whether oil and gas prices will spike to a level that hinders economic growth, potentially disrupting the recovery trade. Henry Allen, a strategist at Deutsche Bank, wrote in a report to clients on Tuesday, "We have previously written that geopolitical events usually do not elicit a lasting market response. But the exception is when geopolitical events have macro channels that affect the market. The situation in Iran is a typical example of this." After the US struck Iran last Saturday, crude oil prices surged. Market concerns over future supply skyrocketed after Iran threatened to block the Strait of Hormuz, the lifeline of 20% of global oil and liquefied natural gas transport. However, Allen pointed out that currently WTI crude oil prices are still below the average level of 2024, and the increase has not reached crisis levels seen during the Russo-Ukrainian conflict or the two Gulf Wars. The strategist stated that if oil prices were to rise on a larger scale, specific factors must be present to cause the S&P 500 index to plunge by more than 15%. Allen believes that at least one of the following three conditions needs to be met, but none of these conditions have appeared yet: oil prices surge by at least 50% to 100% and continue for months; an increase in oil prices pushes the already cooling economy into recession or significant slowdown; central banks adopt hawkish policies in response to the rise in oil prices. He said, "The key question in the next few days will be whether any of these conditions are triggered."