Goldman Sachs: Rare Risk Appetite + Momentum Combination Not Seen Since 2000

Goldman Sachs: Rare Risk Appetite + Momentum Combination Not Seen Since 2000

In mid-May 2026, Goldman Sachs portfolio strategists issued a notable tactical warning regarding extremely elevated risk appetite and momentum in the equity markets. This warning was reinforced on May 22, 2026, by Peter Oppenheimer, Chief Global Equity Strategist and Head of Macro Research in Europe, who highlighted that the firm's Risk Appetite Indicator (RAI) has hit historic extremes, while retail participation has surged.

Extremes in Risk Appetite and Retail Volumes

Goldman Sachs' proprietary models show that investor sentiment has reached a fever pitch:

• Risk Appetite Indicator (RAI): Surpassed 1.1 in mid-May 2026, placing it in the 99th percentile of all readings since 1991. This is the highest reading since 2021.
• Retail Trading Volumes: Goldman Sachs' trading desk estimates that retail trading volumes in the U.S. have jumped 28% since mid-April 2026, confirming a massive wave of retail optimism.

When combined with an equity momentum Z-score above 3.0, this "double high" is a rare setup previously seen only during the peak of the Dot-Com bubble in 2000. It indicates that the rapid upward momentum of the market is heavily driven by sentiment, leaving it highly vulnerable to a sharp pullback if economic growth slows or inflation surprises to the upside.

The Breakdown of the 15-Year Market Pattern

Oppenheimer argues that the structural regime that dominated global markets for nearly 15 years is now breaking down. Under the old paradigm:

1. The United States consistently outperformed other regions.
2. Technology outperformed all other sectors.
3. Growth-oriented stocks outperformed value-oriented ones.

This pattern is being disrupted by rising long-term interest rates, driven by expanding term premiums and growing government debt. Higher rates reduce the present value of very long duration growth stocks (fast-growing companies whose profits are expected far in the future) and compress the valuations of "defensive" and "quality" stocks that were previously valued as bond proxies.

The Capital Expenditure (Capex) Super-Cycle

A major countervailing force to this market fragility is a dramatic, structural boom in capital spending, led primarily by major U.S. technology hyperscalers. Unlike the decade following the 2008 financial crisis—which was characterized by capital-light business models and low capital investment—the current era is marked by massive physical spending.

This capex boom is flowing beyond semiconductors and tech hardware into traditional industrial, materials, and energy businesses that build and power physical infrastructure (such as data centers and electrical grids).¹ This shift is giving rise to a more eclectic mix of market leaders, creating emerging pockets of growth within traditional value sectors.