Shortages dominate capital flows; risk assets rebound, but tail hedges still have value

Overview

The report explains recent global market moves through the lens of “shortages”: tight supply/demand conditions in energy products, the AI supply chain, memory chips, power, and capex demand are channeling capital into the related assets. The Iran ceasefire reduced the most extreme downside risks and allowed risk assets to recover quickly; however, if confirmation of a peace agreement and the reopening of the Strait of Hormuz remains delayed, oil, inflation, and rates could again shock markets.

Core views

The core view is that the risk distribution is more balanced than at the peak of the conflict, but that does not mean the risk has disappeared. Goldman Sachs believes that if energy flows gradually recover, oil and rate markets could ease, and the rebound in risk assets should broaden across regions and sectors; but concentrated valuations and positioning in AI exposure, higher long-end yields, optimistic growth pricing, and a credit-market reassessment will all make the upside path more volatile.

Analysis framework

The report uses a cross-asset framework, mapping the performance of equities, rates, FX, commodities, credit, and volatility against energy shortages, AI capex, macro growth, policy pricing, and geopolitical tail risk, and then uses scenario analysis, option-implied volatility, yield repricing, FX terms of trade, and real EM carry levels to identify relative opportunities.

Methodology notes

• cross_asset_strategyShortage-driven capital-flow framework

  When physical supply is short, prices must rise to attract capital into the supply bottleneck.

  The report treats energy, memory chips, power, and AI infrastructure as the main common drivers of current pricing and capital flows.

• scenario_analysisIran conflict and oil-price scenario analysis

  Different assumptions about energy-flow recovery timing and supply damage correspond to different Brent price paths.

  The chart shows that in a severely adverse scenario, Brent prices could be significantly above the forward curve in mid-2026 before gradually easing into 2027.

• volatility_strategyEquity volatility and correlation decomposition

  Rising single-stock volatility but lower correlation limits the upside in index volatility.

  The report argues that the split between winners and losers inside the AI theme lifts single-stock volatility, while low correlation keeps broad index volatility such as SPX at low levels.

• fx_strategyTerms-of-trade and carry-return framework

  Commodity terms of trade, rate differentials, and real carry levels together explain FX performance.

  The report favors some high-yield and commodity-linked EM currencies and emphasizes that RMB appreciation is more likely to come from fundamentals and the external surplus than from a short-term event.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• U.S. stocks and Nasdaq

  The main beneficiary asset of AI capex and optimistic growth pricing

  Strengths

  AI-related earnings revisions and semiconductor/memory shortages support performance, and market-implied growth has improved materially.

  Weaknesses

  Valuations and positioning are highly concentrated; if AI investment returns and balance-sheet absorption capacity are re-evaluated, a pullback could follow.

  Comparison

  From February 26 to May 14, the Nasdaq rose by about 7.4 standard deviations on a standardized basis, stronger than the S&P 500's roughly 4.8 standard deviations.

  Risks

  Higher long-end rates, crowded AI positioning, single-stock dispersion, and credit concerns.

• European stocks, credit, and FX downside options

  The report's preferred tail-risk hedge

  Strengths

  Downside protection still screens well in adverse oil-price and hawkish-policy shock scenarios.

  Weaknesses

  If the Iran crisis is fully resolved and energy prices fall, protective positions could lose money.

  Comparison

  The report says European downside, credit, and FX hedges remain attractive in the cross-asset comparison.

  Risks

  Hedging cost, timing, and decay if the conflict eases quickly.

• Brent crude and energy assets

  Direct beneficiary or protection asset against Middle East conflict and Strait of Hormuz closure risk

  Strengths

  If energy flows are disrupted, oil can continue to provide protection.

  Weaknesses

  If the crisis is fully resolved, long oil positions are likely to give back gains.

  Comparison

  In the severely adverse scenario, the Brent oil peak is well above the forward curve.

  Risks

  Peace agreement, supply recovery, weaker demand, and policy intervention.

• Rates and front-end yields

  Hawkish repricing driven by energy prices and inflation pressure

  Strengths

  The market has already priced in more rate-hike risk; if energy supply recovers, front-end rates may have room to ease.

  Weaknesses

  The window for rate cuts is narrowing, and fiscal spending, defense spending, energy-security spending, and AI infrastructure investment limit downside in long-end rates.

  Comparison

  10-year yields in the U.S., the U.K., the euro area, and Japan are all higher than before the war.

  Risks

  Second-round inflation effects, higher term premium at the long end, and growth that does not weaken materially.

• Renminbi and yen

  The main underpriced Asian currencies and external-imbalance theme

  Strengths

  The case for RMB appreciation is seen as more fundamental, coming from China's external surplus and export competitiveness; the yen also looks very cheap on valuation.

  Weaknesses

  Without recession fears or a more hawkish shift by the BoJ, the yen lacks a sustained appreciation driver.

  Comparison

  Year to date, the RMB is about 2.9% weaker against the U.S. dollar, while the yen has been relatively weaker against the dollar.

  Risks

  Policy intervention, trade frictions, yield-spread changes, and swings in global risk appetite.

• EM Carry Basket

  A preferred trade amid high real carry and divergent commodity terms of trade

  Strengths

  The report favors BRL, HUF, MXN, and ZAR as long positions in the EM carry basket, and believes the window for high-yield currencies may last longer.

  Weaknesses

  If the energy shock worsens or risk sentiment turns sharply, some EM currencies will still come under pressure.

  Comparison

  High-yield EM currencies deliver stronger total returns versus low-yield funding currencies such as the euro, Swedish krona, and Thai baht.

  Risks

  Pressure on energy importers, central-bank policy changes, a dollar rebound, and geopolitical escalation.

Key data

• U.S. hyperscale cloud capex expectations2026年7550亿美元、2027年8900亿美元、2028年9190亿美元Up about 12.2%, 12.7%, and 12.8% from the start of the first-quarter earnings season.
• Technology investment as a share of GDP2025年约4.9%Above the roughly 4.4% peak during the 2000-2001 internet bubble.
• Market-implied U.S. forward growthLatest约2.5%-2.6%Well above Goldman Sachs' roughly 1.95% four-quarter forward forecast and the 2.20% y/y forecast for Q4 2027.
• Brent oil adverse scenario2026年5月约125美元/桶Around US$145/barrel in a severely adverse scenario, then gradually easing into 2027.
• EM FX real carry level2026年约1.6%-1.8%Above the roughly 1.0% historical average since 2000.
• Dollar performance year to date广义美元大致接近-1%The dollar is broadly stable, but weaker against BRL, AUD, MXN, MYR, and CNY, and stronger against some Asian currencies.

Impact & implications

The investment implication is to keep watching shortage beneficiaries, including the AI supply chain, semiconductors and memory, energy producers, commodity-linked FX, and select EM carry trades; at the same time, because energy shocks, policy-rate repricing, AI valuation concentration, and higher long-end rates can still trigger sharp revaluations, risk exposure should be paired with downside protection in European equities, credit, and FX, as well as long-dated equity volatility.

Risks

• A renewed escalation in the Iran conflict or a prolonged closure of the Strait of Hormuz, which would push up oil and rates while pressuring growth.
• The market has already priced in a good deal of easing in risk, so if the optimistic assumptions are challenged, risk assets could reprice more sharply.
• AI-related asset valuations, capex, and market concentration are high, so doubts about investment returns could trigger volatility.
• Inflation upside from energy prices could make it harder for global central banks to cut rates, and may even push up pricing for hikes.
• Long-end rates are supported by fiscal spending, defense spending, energy security, and AI infrastructure investment, which limits room for easing.
• High single-stock volatility but low index correlation may mask the risk of correlation suddenly rising under macro shocks.

What to watch

• Progress on an Iran peace agreement and whether the Strait of Hormuz is credibly reopened.
• Brent prices, energy shortages, and investment in energy resilience in Asia and Europe.
• Whether the impact of energy prices on U.S. and global inflation data fades quickly.
• Whether front-end rate pricing in various countries continues to turn more hawkish, and whether expectations for 2026 rate cuts are compressed further.
• Whether AI supply-chain, semiconductor, and memory shortages ease, and whether hyperscale cloud capex expectations continue to be revised upward.
• Changes in long-dated SPX implied volatility, single-stock volatility, and implied correlation.
• The RMB appreciation trend, yen policy signals, and carry returns in high-yield emerging-market currencies.