'Weeks Where Decades Happen': Global Reflections With Goldman's Top Trader

While 99% of the time market participants focus on finding the best risk-adjusted growth opportunities over the next six months, top Goldman Sachs trader, Louis Miller, points out that we happen to be in the 1% of time when investors are debating terminal value.

It is more likely than not that this bout of depression ends, but elevated US equity valuations compared to low teens earnings growth poses a challenging outlook for returns if the current funk continues.

Momo volatility in the US and Europe remains challenging to navigate, but Asia’s winning streak may have further to go…

There are decades when nothing happens and weeks where decades happen… 

This week, another AI scare extended Software’s sell-off and anxiety about private credit. But market jitters around the pace of sell-off and potentially approaching trough valuations manifested in a sharp momo unwind on Thursday with our AI at Risk (GSTMTAIR) and Software vs. Semis (GSPUSOSE) baskets posting 2.0-2.5 std dev moves higher. European Software (GSSBSFTW) also bounced +4.8% from the lows. NVDA’s 4Q was a solid beat vs. consensus but price action underwhelmed given the ongoing debate on sustainability of AI capex spend. Meanwhile, the Asia rally has been impressive, and we remain bullish markets like Korea despite KOSPI’s staggering +48% YTD run. One area that has worked in Asia & globally is robotics (GSXGROBO) and US-based companies (GSXUROBO) are heavily shifting their strategies towards this technology, positioning robotics as multibillion-dollar TAM by fiscal 2026.

Factor vol, AI anxiety, and an opportunity for Value to shine. 

Momo volatility can continue in the near-term, especially in the context of elevated positioning (gross & net) and extreme factor crowding (5y highs). While strong earnings momentum should support continued upside in the long leg, we are more cautious of pain coming from an extended squeeze in the short leg. Buying short-dated calls on the short-leg of momo looks like a sensible and attractively valued hedge. As AI hyperscaler and capex plays are likely to see multiples capped in this environment, value pockets have a nice set up to outperform. Europe, and especially European Banks have been the perpetual value trade. We like exposure in periphery markets like Greece (GSXEGRBK), where the >10% YTD sell-off offers the most compelling re-entry point this trade has had in a while, and ahead of the key DM index inclusion catalyst (end March). The ‘physical asset’ trade should also do well; we like owning upside in UK Real Estate (GSXEUKRE) which sits at the cross-section of attractive value & physical asset exposure.

While the US and Europe have been confusing to navigate, Asia has been simple.

YTD winners have consistently rallied: Korea and Japan are the two markets most in focus with KOSPI +48% and the Takaichi trade (GSXAJESC) +28%. We like adding beta exposure in Korea via our Korea Magnificent 10 (GSXAKMAG); buying the dip in Japanese Banks (GSXAJMEB); and riding the structural semi materials wave (GSXAJSMA) on memory price hikes. Investor confidence in the region remains high but our client conversations do indicate some anxiety to protect YTD gains while the sun is still shining. Short sale bans, recall risk, liquidity and other regional market frictions make hedging in the Asia time zone harder but a pickup in thematic crowding and vol make it essential. Options on baskets offer an attractive solution.

Closer to home, dislocations in Consumer sub-themes offer interesting entry points and the trade-off between Tax Refund and Staples seems like an obvious move post the AI anxiety week. 

Tax Refund beneficiaries (GSXURFND) are ~7% off the highs just as refunds are hitting consumer wallets. At the same time, Staples (GSXUSTAP) trade more expensive vs. the market than they have historically and have seen slower earnings growth. We like pairing longs in GSXURFND with shorts in GSXUSTAP to gain exposure to rising consumer confidence and the expected refund driven pick-up in discretionary spend. We also like going short Global Alcohol (GSXGBOOZ) given a sharp YTD re-rating and the structural decline in demand (GLP-1s, consumer behavior, etc. ).

Asia’s Winners Keep On Winning

Korea: 

While AI-Disruption fears are dampening investor confidence in the US and Europe, Asia has “emerged” as the winner. KOSPI’s staggering +48% YTD rally is showing no signs of slowing down as the index refreshed ATHs led by Memory, AI & Electrification names.

GSXAKMAG’s enhanced exposure to secular growth sectors has driven consistent outperformance vs. KOSPI which we think can continue

Source: Goldman Sachs FICC & Equities, Bloomberg, as of 27 Feb 2026; past performance is not indicative of future returns

South Korea: Upcoming Events Calendar

Korea’s P/B valuation remains attractive given the market’s strong ROE

Source: Goldman Sachs Global Investment Research, Factset, MSCI; past performance is not indicative of future returns

We like adding exposure to Korea beta via GS Korea Magnificent 10 (GSXAKMAG, +6.5% 5D CHG) amidst rising earnings, strong domestic & retail inflows, further upside to memory prices, cheap valuations and upcoming corporate reform announcements.

Japan: 

Japanese banks faced downward pressure this week after news reports that PM Takaichi voiced apprehension over further rate hikes and later nominated 2 BOJ board members who are viewed to be dovish. We are buyers of this dip and recommend going long GS Japan Mega Banks (GSXAJMEB, -1.89% 5D CHG) as BOJ independence remains intact and there is non-zero potential for any early hike with BOJ governor Ueda flagging a Mar/Apr hike in an interview with Yomiuri.

 A barbell trade in Japan: Banks (GSXAJMEB) offer a ‘buy the dip’ value opportunity & Semis Materials (GSXAJSMA) provide structural growth exposure

Source: Goldman Sachs FICC & Equities, Bloomberg, as of 27 Feb 2026; past performance is not indicative of future returns

We also note interest in GS Japan Semis Materials (GSXAJSMA, +12.15% 5D CHG) as clients rotated out of software/end-layer application AI plays into hardware and component materials. Due to tightening supply/demand dynamics, price hikes are anticipated for material names. Note, Resonac announced +30% price increases for its copper clad laminates, and Mitsui Kinzoku is proactively implementing price hikes for its electrolytic copper foil. 

China: 

China reopened after the Lunar New Year break with broader consumption names supported by positive spending & tourism prints. Our GS China CHEERS basket (GSXACHEE) is a Wolfe factor optimized expression of positive Chinese New Year seasonality and it has been outperforming vs. the benchmark, returning +5% since we initiated the trade (Feb 6th). Wolfe recommends holding the strategy to March 16th to fully capture the New Year market rally.

Our GS China CHEERS Basket is outperforming the market amid positive New Year seasonality

Source: Goldman Sachs FICC & Equities, Bloomberg, as of 27 Feb 2026; past performance is not indicative of future returns

We expect focus in Chinese equities to shift to domestic policy winners (GSXACFYP) into the March Two Sessions (Mar 4-11)

Source: Goldman Sachs FICC & Equities, Bloomberg, as of 27 Feb 2026; past performance is not indicative of future returns

Elsewhere in China, we have noted a preference for AI Infra (GSXAAIIN, +4.09% 5D CHG) names over Soft Tech (GSXACAIT, -4.52%). Although AI/Tech still remain topical in the region, we believe the primary focus in upcoming weeks would be domestic policy driven and like allocating to GS China 15th 5 Year Plan (GSXACFYP, +1.51% 5D CHG) given today’s Politburo meeting to discuss the draft outline of the 15th 5YP and upcoming March Two Sessions (Mar 4-11) where details of the plan will be officially announced.

Where’s the mojo in momo?

Earlier in the week, GS PB flagged that the recent bounce in Software could persist in the short term. Coupled with Semis underperformance on the back of NVDA earnings, we saw this translate into the best day for our Software vs Semis Pair (GSPUSOSE) and worst day for our AI Pair (GSPUARTI) since DeepSeek on Thursday.

From a factor perspective, these technical moves brought down Momentum, especially the shorter horizon factors (3m Mo: GSPRHMO3 and 6m Mo: GSPRHMO6), which are more exposed to negative software exposure given recent underperformance. We have observed in the US that Momentum is extremely correlated to the AI Winners vs Losers Trade (GSPUARTI), Semis vs Software, and Gold/Metals (GSXGOLDM). These trades have performed extremely well in recent months and there is still additional risk to the factor given elevated positioning (gross and net) as well extreme crowding in momentum (5y high).

12m vs 6m US Momentum net sector skews

Source: Goldman Sachs FICC & Equities, Bloomberg, as of Feb 2026. Past performance is not indicative of future results.

12m vs 3m US Momentum net sector skews

Source: Goldman Sachs FICC & Equities, Bloomberg, as of Feb 2026. Past performance is not indicative of future results.

However, it’s also worth flagging that the outperformance of Momo YTD has been mostly driven by the long leg as winners have outperformed on earnings and the top themes have had the highest positive earnings revisions. As a result, we believe the long leg of momentum will continue to be bought while the short leg could cause further pain if the recent rebound continues.

With near-term momo pressure most originating out of the short leg, we think short-dated call options offer a cheap hedge in Europe while put spreads are the most attractive in the US:

• Europe: GSX3BFMS Mar26 105% Call costs 50bp, 21v

• US: 3m 95%/85% Put Spread costs 2.9%, 35/38v

Following the violent moves under the surface, the momentum sector tilt may start to change in upcoming months. When comparing our medium-term momentum pair (GSPRHIMO) to our 3m and 6m momentum pair it is apparent that Health Care weight should start to rise, Consumer Staples underweight should reduce to flat while Info Tech (especially software) should drag down the weight of info tech within momentum.

Europe: The Perpetual Value Trade

 The ex-US diversification trade has mainly played out via strong inflows to Asia ex-China, while positioning in Europe remains light. Taking a step back, despite turmoil under the market surface, European equities are still outperforming the US, benefitting from the region’s value and ‘real asset’ tilt. Following the rapid YTD run in Asian equities and given the persistent need to diversify out of US mega-cap tech exposure, Europe deserves its day in the sun. Against the current backdrop, Europe’s value tilt and greater exposure to the ‘real asset’ trade should support outperformance in select pockets. Tactically, we see a compelling re-entry point in Greek Banks (GSXEGRBK) and scope for a rebound in UK Real Estate (GSXEUKRE).

Greek Banks (GSXEGRBK) 

...are >10% off YTD highs and RSI is now close to ‘oversold territory’ while there has been no change in the bullish fundamental story for these stocks. In part this has been a function of healthy profit taking post the stellar 100%+ rally since Jan 2025 and in part a function of broader market rotation. But, ahead of a key catalyst for this thematic i.e. DM index inclusion, we think this is the most compelling re-entry point this trade has had for a while. MSCI has launched its public consultation for Greece’s EM to DM reclassification with a final decision expected by March 31. If approved, implementation would be during the Aug 2026 index review and Greek Banks should see the greatest positive impact from net passive inflows given their weight in the overall index.

Source: Goldman Sachs FICC & Equities, Marquee PlotTool Pro, as of Feb 27, 2026; past performance is not indicative of future results

Fundamentally, Greek banks offer loan growth that is double the European average while valuation remains at a discount (1.1x P/B vs. 1.3x P/B). In the micro, earnings this week have been solid and Piraeus’s CMD next week (Mar 5) should give more color on 2028 targets.

UK Real Estate (GSXEUKRE) 

...sits at the cross-section of ‘attractive value’ and ‘real asset’ trade. The basket trades on sub-16x PE vs. a 5y median of 18x (-13% discount). We see scope for a re-rating given macro and micro tailwinds to the sector. On the macro, we expect the market to catch up with our economists’ more dovish UK terminal rate forecast into the March BoE meeting (Mar 19), while on the micro, improving housing affordability, favorable office S/D dynamics, and positive signs of rental growth in retail all point to better EPS momentum.

UK Real Estate’s market relative performance is closely correlated to long-term Gilt yields; the recent divergence should reverse as market focus turns to further BoE easing

Source: Goldman Sachs FICC & Equities, Bloomberg, as of 27 Feb 2026; past performance is not indicative of future returns

This should help narrow the historically wide P/NTA discount for UK real estate stocks (-32% currently vs. -19% historical avg). M&A within the small-caps offers further upside potential.  

4. Across the US consumer complex, we see opportunities for dispersion.

One policy driven tailwind the market isn’t paying enough attention to yet is tax refunds. Last summer’s fiscal package implemented tax cuts retroactively for 2025, however, tax withholding rates were not adjusted which should drive higher than average tax refunds this year. With the tax filing season beginning on Jan 26, these refunds could drive increased spending and companies like WMT are even incorporating these expectations, allowing them to guide higher into 2026 according to GS Research.  GSXURFND consists of US-listed companies in the consumer sector we expect to benefit from tax refunds as it excludes big-ticket items that households tend to prepare for in advance and focuses on smaller-ticket items that tend to benefit from slightly higher discretionary spending.

Tax Refund Exposed Equities (GSXURFND) have had more positive earnings momentum than broader staples, even as these names have underperformed

Source: Marquee PlotTool Pro as of 26 Feb 2026, past performance is not indicative of future returns.

Alcohol Exposed Equities (GSXGBOOZ) benefitted from the recent defensive rotation, but are likely to revert back to trend given no meaningful changes to the drivers of less alcohol consumptions (GLP-1s, generational preferences)

 Source: Goldman Sachs FICC & Equities, Bloomberg, as of 27 Feb 2026; past performance is not indicative of future returns

Looking Ahead:

Next week will be a macro heavy week in the US with ISM Manf Monday, which should be an indicator for cyclicals, and NFP on Fri, which will be in particular focus given the recent conversations on AI and jobs.

China's "Two Sessions" begins on Wednesday. Goldman Sachs Research expects policymakers to lower the national real GDP growth target to "4.5-5.0%" for this year, down from "around 5%" last year. This will be a crucial development to monitor, given its potential impact on global markets.

S&P implied move through next Friday (3/6) is 1.96%.

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