The Goldman Traders Say Buoyant Stocks Are Ignoring Recession Risks

A 30% chance of a U.S. recession may sound alarming, but global equities continue to hold strong as investors find it increasingly difficult to bet against the market’s upward momentum. According to a Goldman Sachs Group Inc. macro trader, doing so “feels almost irrational” given current conditions.

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“The market simply isn’t looking far enough ahead, which is why it’s largely dismissing recession risks,” wrote Paolo Schiavone in a recent note to clients.

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Instead of focusing on potential signs of a labor market slowdown, investors are zeroing in on ample liquidity and powerful long-term growth drivers such as advancements in artificial intelligence and fiscal credit expansion.

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U.S. stocks remain near record highs, buoyed by stronger-than-expected corporate earnings and expectations that the Federal Reserve will move toward lower interest rates. These positive forces have helped overshadow concerns about wide-reaching tariffs and their potential drag on the economy.

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Meanwhile, capital is once again flowing into major technology names and AI-related plays, even as economic indicators hint at a possible deceleration in growth.

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In the derivatives market, swaps traders are now pricing in more than 100 basis points of Fed rate cuts by mid-2026. Adding to the bullish sentiment, increased front-end Treasury issuance has been injecting liquidity into money markets, keeping cash levels elevated.

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This has attracted fast-money investors, who have significantly contributed to the S&P 500’s strong rebound following its tariff-driven pullback in April.

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Schiavone noted that these trend-following investors—often referred to as commodity trading advisors (CTAs)—now account for the majority of “hot money” flowing into equities.

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This influx has resulted in a market that appears somewhat short-sighted, as these investors rely on a straightforward playbook of letting winning trades run, leaving little room for bearish positioning based on fundamentals.

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With short-term strategies dominating and market volatility remaining relatively low, few traders are willing to challenge the ongoing uptrend. As Schiavone put it, the market’s path of least resistance continues to point higher, making it difficult for skeptics to fade the rally.

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