The stock market surge has delivered a rare signal. Here's what history suggests happens next, says Goldman Sachs.

By Jamie Chisholm

Momentum and risk appetite are ascendant

It's mainly been green on the screen of late, but Goldman is flagging a possibly bearish signal.

As the U.S. stock market registered more record highs this week, it threw up a seldom-seen technical and sentiment signal that may cause bulls to pause for reflection.

In a note published this week, a team of Goldman Sachs analysts led by Andrea Ferrario said the heightened risk appetite and strong equity market momentum are combining in a way not replicated since the turn of the millennium.

Goldman's risk appetite indicator, or RAI, measures investor risk appetite using high-frequency data across five main categories: fixed income, equity, liquidity, commodities and credit.

It's particularly useful as a contrarian tool when sharp falls can suggest traders are too cautious, and a rally may ensue.

However, the RAI this week rose to 1.1, surpassing the levels at the start of this year and reaching the highest point since 2021. It's only been above 1 for 2% of the time since 1950, Goldman said.

And, importantly, the current high RAI reading coincides with a relatively sharp rise in equity momentum plays. The iShares Edge MSCI USA Momentum Factor ETF CL:MTUMCL is up 33% from its March 30 trough, while the S&P 500 SPX is up 18.25%. This has produced a momentum z-score of above 3. Z-scores measure a price relative to its history - or, to be more technical, how many standard deviations a data point strays away from its average.

This risk and momentum combination makes "the current backdrop exceptional," Goldman said. "[T]his is the first time that both risk appetite and momentum performance have been at such elevated levels since the start of 2000."

What does this message signal? "Historical analogues point to more limited upside for the broad equity market and more volatility for momentum," said Goldman.

The bank noted that, since 1962, there have been eight episodes with an RAI above 0.9 and a U.S. equity momentum z-score above 2.0. Three out of those eight episodes were eventually followed by a bear market within the following two years.

"That said, in 1999 and 2021 equity prices peaked almost 12 months after the moment when RAI and equity momentum first reached elevated levels," the analysts said

Furthermore, the analysts stressed that, as with elevated valuations, an elevated RAI (even coupled with high equity momentum) "is not a sufficient indicator to time the peak of the market, in our view."

That may be the case now, as earnings have become a more important driver for equities and valuations are supported by higher corporate profitability.

And the macroeconomic backdrop remains supportive, too. Goldman's economists have shaved their 12-month U.S. recession probability to 25% as economic activity has held up well and financial conditions have eased.

"Stronger evidence of weakening fundamentals or negative price momentum would be needed to justify a more bearish signal," Goldman said.

The markets

U.S. stock-indices SPX DJIA COMP were lower at the opening bell as Treasury yields BX:TMUBMUSD10Y jumped. The dollar index DXY was higher, while gold futures (GC00) were trading around $4,557 an ounce.

   Key asset performance                                                Last       5d     1m      YTD     1y 
   S&P 500                                                              7444.25    1.07%  6.00%   8.75%   26.33% 
   Nasdaq Composite                                                     26,402.34  2.18%  9.94%   13.60%  37.89% 
   10-year Treasury                                                     4.45       5.50   13.00   27.80   1.50 
   Gold                                                                 4704.7     0.20%  -2.20%  8.60%   45.03% 
   Oil                                                                  100.64     3.11%  12.26%  75.30%  63.14% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

OpenAI is exploring legal action against Apple (AAPL) over their deal to integrate ChatGPT into the iPhone, according to a Bloomberg report.

Anthropic has agreed to the terms of a $30 billion fundraising plan that will value it at $900 billion, according to the Financial Times.

Oil prices (CL.1) rose after U.S. President Donald Trump said he was losing patience with Iran and that China's President Xi Jinping agreed Tehran can't have nuclear weapons.

Trump purchased shares of Boeing (BA) and Nvidia (NVDA) as those companies were expected to score new business deals during his now-completed trip to China.

Bill Ackman's Pershing Square fund has taken a new stake in Microsoft (MSFT) after a recent decline in the share price.

The pound (GBPUSD) fell and U.K. government bond yields BX:TMBMKGB-10Y led global yields higher as investors worried that British Prime Minister Keir Starmer faces a leadership challenge from the left of the ruling Labour Party.

Kevin Warsh has begun his tenure as Chair of the Federal Reserve.

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The chart

The S&P 500 on Thursday registered its 18th record close of 2026. That's already about the average number of fresh peaks for a year, according to Ryan Detrick, chief market strategist at Carson Group, in this post on X.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   MU      Micron Technology 
   AMD     Advanced Micro Devices 
   TSM     Taiwan Semiconductor Manufacturing 
   INTC    Intel 
   GME     GameStop 
   RKLB    Rocket Lab 
   EDBL    Edible Garden 
   MSFT    Microsoft 

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05-15-26 0930ET