Extreme optimism becomes a shackle? The perfect "blonde girl" has arrived, but the US stock market is still stagnant.

The bullish stock market investors have been immersed in the beautiful scene of the "golden-haired girl", and risk appetite emotions have been pushed to extremely high levels, making it increasingly difficult to judge where the next upward momentum in the market will come from. US inflation data lower than expected initially boosted the market, but this effect was short-lived, with resistance still strong as stock indices hit new highs. The 10-year US Treasury yield continues to hover around 4.6%, while the US dollar index also remains stable at levels around the May 2025 high. Despite a positive start to earnings season, these conditions are currently restricting the upward movement of the stock market. Richard Privorotsky, a partner at Goldman Sachs Group, Inc., said, "Whether the stock market can continue its upward trend ultimately depends on earnings guidance and positioning levels, not just the headlines. Energy remains a key macroeconomic risk factor, but currently, the inflation environment is improving." Privorotsky pointed out that this earnings season is likely to yield good results overall, with the banking industry having crossed the performance threshold, and ASML Holding NV ADR(ASML.US) reporting that semiconductor capital expenditure demand remains healthy. "Like most AI-related stocks, the question is no longer limited to the data itself, but whether this data is impressive enough relative to current positions," he added. Institutional positions are flashing warning signals: cash reserves are low, systematic strategies are "fully loaded" A survey of fund managers conducted by Bank of America Corp this week showed that the cash holdings of professional investors have fallen to extremely low levels, and the bank's "bull-bear indicator" has also raised warning signals. Additionally, data from Deutsche Bank Aktiengesellschaft indicates that systematic strategies are currently heavily long positioned, with little room left for further buying. Trend-following CTAs in equities are at the upper end of historical range, at the 72nd percentile, while volatility control fund positions are more extreme, currently at the 91st percentile. Elevated positions are also reflected in fund flows. Strategists at French Industrial Bank, Arthur van Slooten and others, stated that although funds inflows into bond and money market funds have exceeded those into stock funds this year, the increase in assets under management for the latter has surpassed them. In the fund landscape covered by EPFR Global, totaling $72.9 trillion excluding commodities, stock funds currently account for 64.7% of total assets, a historical high. "In other words, fund investors' risk appetite is at the highest level on record," they wrote. The bull logic remains strong, but "going up again" requires a new narrative Despite this, in the current backdrop of declining inflation, strong economic growth, and robust corporate earnings, the bullish stance seems justified. In addition, US CPI and PPI data both show easing price pressure, and the Federal Reserve may shift to a more dovish stance in the coming weeks. Andrew Tyler, leading a team of market intelligence at J.P. Morgan, said, "For the bull market, the current situation even surpasses the best-case scenario envisioned by the 'golden-haired girl'." The team believes that inflation data should allay market fears of a rate hike in July and may also ease concerns about actions in September. "This sets the stage for further market upward movement and market broadening." The J.P. Morgan team continues to favor a "barbell" allocation, focusing on both tech and cyclical stocks, while holding healthcare as a low-correlation asset. Within the tech sector, they believe that the current market consensus - long semiconductors, short the "Big Seven" or software stocks - may change, with valuations becoming attractive, increasing the probability of capital flowing back into the "Big Seven". However, the team also cautioned that investors may need to see changes in end-user AI adoption rates or accelerated earnings growth in order to reduce reliance on credit markets in the future. Meanwhile, the next stage of market upside may still rely on momentum trading. After a recent significant sell-off, the position status of related sectors may have improved, but overall investor exposure remains high. While sector rotation may help sustain gains, considering the strong influence of momentum trading on the market in the past year, more catalytic factors may be needed to drive benchmark indices higher. Goldman Sachs Group, Inc. strategist Andrea Ferrario and his team stated, "In the past three weeks, the dominant forces in the market have been tested, with the momentum factor facing its most intense sell-off since the early 2000s. While oil prices have once again become a key driver of cross-asset returns, the momentum effect still dominates the stock market."