Goldman Sachs warns that the space for continued rise in the US stock market is limited, and the current timing is not ideal for increasing positions.

Despite the recent strong rebound and new highs in the US stock market, Goldman Sachs warns that the market's upward potential is limited and faces higher risk of a pullback, making it not an ideal time for investors to increase their exposure to stocks. Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs, and his team released a report on Tuesday, stating that based on their research framework, the risk of another stock market pullback remains high, while the potential for further gains is limited. The risk-return structure does not support adding more risky assets. Goldman Sachs points out that their framework takes into account stock valuations, macroeconomic conditions, and policy catalysts, including the risks related to the US-Iran conflict. Currently, these factors are weakening the support for further market gains. Data shows that the forward price-to-earnings ratio of the S&P 500 index has risen back above 21 times, while the Citigroup Economic Surprise Index has recently weakened, reflecting a decline in economic data supporting market expectations. The Goldman Sachs team states that the downward risks driven by valuations are rising again, while the business cycle environment is becoming less favorable. The bank's economists have revised down their assessment of global growth and inflation, and expect monetary policy easing to be less than previously expected, with its effects gradually showing up in economic data in the coming weeks. The report also points out that one of the key drivers of the current US stock market rally is the market betting on the maintenance of the US-Iran ceasefire and the easing of inflation pressure from a fall in oil prices. However, this also means that the stock market is highly sensitive to a re-escalation of geopolitical tensions and a rebound in energy prices. If the conflict worsens and pushes oil prices higher, the market could face greater impacts. Goldman Sachs cites options market pricing, stating that traders currently believe there is a higher probability of a 10% drop in oil prices in the next month than a 10% rise, which means that if oil prices unexpectedly surge, the negative impact on the market could be more severe.