US stocks face "Black Friday"! Goldman Sachs, on the contrary, speaks out: Pullback provides a buying opportunity S&P 500 aims at 8000 points

The three major U.S. stock indexes collectively plunged on Friday. The Dow Jones Industrial Average fell by 1.35%; the S&P 500 Index fell by 2.64%, the largest single-day drop since October 2025; and the Nasdaq Composite Index fell by 4.18%, dropping over 1100 points, the largest single-day drop since April 2025. The main reason for the "Black Friday" on the U.S. stock market was the strong employment data boosting market expectations that the Federal Reserve may maintain restrictive monetary policies for a longer period, and even raise interest rates. The high interest rate environment is the main source of pressure for the stock market, especially for growth stocks and technology stocks. Data released by the U.S. Bureau of Labor Statistics on Friday showed that nonfarm payrolls increased by 172,000 in May, exceeding all economists' expectations. The April increase was also revised significantly higher from 115,000 to 179,000, making the job growth in the past three months in the U.S. the strongest level in over two years. The unemployment rate remained at 4.3% for the third consecutive month. Strong employment combined with high energy prices may further increase the pressure on the Federal Reserve to raise interest rates to curb inflation. Several Federal Reserve officials have already indicated that they cannot support cutting interest rates as long as inflation remains consistently above the 2% target. In recent weeks, these officials have also become more open to further rate hikes. Interest rate swap markets indicate that traders expect the Federal Reserve to raise rates by 25 basis points before the December policy meeting, with a 60% probability of a rate hike in October. However, John Vlad, Head of Americas Equity Execution Services at Goldman Sachs Group, Inc., believes that the pullback in U.S. stocks on Friday provides an opportunity for investors to add to their positions rather than a reason to retreat. He believes that there is a clear upward path for the S&P 500 to reach 8000 points this year. Vlad stated that Friday's decline in the U.S. stock market was likely driven by investors taking profits before the weekend and expectations that the upcoming initial public offerings (IPOs) will bring more supply of stocks to the market. Historically, such sell-offs have often provided returns for buyers. He said, "There aren't many pullbacks to buy this year. Historically, buying at a 2% pullback in the S&P 500 has often been profitable, and I think it still is." Vlad said that investors' most common concerns currently include inflation, the political tensions involving Iran, and risks in the private credit markets. However, he believes these worries are more like a healthy "wall of concern" rather than evidence of deteriorating market confidence. He believes that the broader market background still provides support. While the S&P 500 has hit 24 all-time highs this year, Goldman Sachs Group, Inc.'s proprietary market sentiment indicator -- which combines hedge funds, mutual funds, retail investors, and foreign investors' positions -- is currently close to a neutral level. He stated, "Despite the stock market being close to all-time highs at the index level, there is still a lot of concern in the market." From the perspective of institutional investors, Vlad believes that current position management is still relatively restrained rather than overly exuberant. Goldman Sachs Group, Inc.'s main brokerage business data shows that hedge funds' total exposure (the sum of long and short positions) is close to historic highs. Investors are still holding a large number of long positions in artificial intelligence (AI) and technology stocks, while also maintaining significant short positions on macro tools such as stock indices and exchange-traded funds (ETFs). Vlad said, "This tells me that the market is still maintaining a healthy skepticism about future trends." He added that if hedge funds start to unwind these hedge positions in the future, it could trigger the next bull market. Meanwhile, mutual funds' cash holdings ratio is still close to long-term average levels, indicating that investors still have funds available to invest in the stock market. Regarding new stock offerings, Vlad stated that institutional investors' demand for them is one of the strongest he has seen in his career. He mentioned reports about Meta Platforms (META.US) considering a large stock offering. Earlier this week, Alphabet Inc. Class C (GOOGL.US) completed a high-profile transaction. Vlad said that large technology companies conducting large stock financing reflects healthy market demand, not speculative bubbles. He said, "The demand for these stock offerings has never been as strong as it is now." In terms of retail investors, Vlad expects that as long as the job market remains robust, buying activity will continue to demonstrate resilience. Goldman Sachs Group, Inc.'s data shows that since the peak of the pandemic in March 2020, retail investors in the U.S. have not been net sellers of U.S. stocks for more than one week in a row. He said, "Unless we start to see a significant loss of jobs, retail buying activity is likely to remain a stable and healthy force in the market." Vlad believes that the most likely factor to challenge his optimistic outlook is if U.S. companies as a whole show widespread disappointment in earnings. However, he does not see any signs of this currently. He pointed out, "If overall earnings performance of S&P 500 constituents is disappointing, that would be a very worrisome signal. But we haven't seen any evidence of that yet." With a series of high-profile IPOs on the horizon -- including the listings of SpaceX and Anthropic, Vlad stated that the current pipeline of new offerings aligns more with fundamental logic rather than signaling a market top. He also expects that corporate stock buyback demand will offset the additional supply brought by IPOs. As for short-term tactical risks, Vlad pointed out that after a strong year, systematic investors such as commodity trading advisors (CTAs) and volatility control funds currently hold a relatively high proportion of S&P 500 exposure. He said that if the stock market weakens over consecutive trading days in the future, these investors could become sellers. However, Vlad remains firmly bullish on the market. He said, "We believe these pullbacks are buying opportunities. There is a clear path for the S&P 500 to reach 8000 points or even higher this year."