Goldman Sachs US Morning Update: Oil Prices, AI Momentum, and US-China Relations Dominate the Market Narrative

Overview

This is a Goldman Sachs US morning market intelligence update covering macro, equity strategy, commodities, consumer, healthcare, industrial, and TMT sectors. The core backdrop is that the energy crisis and the closure of the Strait of Hormuz have pushed up oil prices, putting pressure on Asian and European equity markets; at the same time, recent US equity gains have been driven by AI trades and Momentum, pushing indexes to new highs, but market breadth has narrowed, and the report warns of medium-term momentum pullback risk.

Core views

The report argues that investors should not simply chase AI and momentum trades at present, but should instead prioritize companies with fundamental support from earnings growth and upward earnings revisions. Although AI-related trades have contributed most of the S&P 500's year-to-date gains, history shows that sharp momentum rallies are often followed by pullbacks; low-momentum laggards not only tend to outperform on a relative basis during momentum crashes, but may also generate absolute gains. On the macro side, elevated oil prices, weak Chinese activity data, near-stagnant European growth, and uncertainty in US-China relations are all important near-term constraints on asset pricing.

Analysis framework

The report uses a morning market briefing format, linking overnight global market performance, macro data, thematic strategy, sector research, and individual stock research summaries. The focus is not on building a single valuation model, but on providing investors with positioning clues for the day and near term through macro shocks, thematic crowding, earnings revisions, historical momentum patterns, and Goldman Sachs research lists.

Methodology notes

• Factor frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factor profile

  The Goldman Sachs factor profile provides investment context for individual stocks by comparing their growth, financial returns, valuation multiples, and composite percentiles versus the market and sector peers; the composite percentile equals the average of the growth percentile, financial return percentile, and the multiple percentile adjusted for low valuation.

• Equity strategyMomentum reversal study

  Momentum reversal

  The report cites a study of the sharpest Momentum reversals over the past 100 years, showing that previously lagging low-momentum stocks not only outperformed on a relative basis during momentum crashes, but could also generate absolute gains, making them useful hedges against crowded momentum trades.

• Thematic exposureAI sensitivity and EPS revisions

  AI sensitivity and upward earnings revision screening

  The report emphasizes screening for companies with recent upward EPS revisions but low sensitivity of their share prices to AI trades and economic growth pricing, in order to avoid excessive exposure to crowded AI trades.

Asset mapping & comparison

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

• S&P 500

  Core proxy for US equity risk appetite

  Strengths

  Has reached new highs multiple times over the past month, with consensus EPS forecasts for both 2026 and 2027 up 8% year to date.

  Weaknesses

  The rally is highly dependent on AI trades, market breadth has narrowed, and Momentum trades are crowded.

  Comparison

  Compared with a more broadly distributed rally, this advance is more concentrated, with AI contributing most of the year-to-date return.

  Risks

  Momentum reversal, slower upward earnings revisions, oil price shock, and weakening macro data.

• AI-related stocks

  Main thematic driver of the recent rise in US equities

  Strengths

  AI trades contributed 85% of the S&P 500's year-to-date return and supported the market in reaching new highs.

  Weaknesses

  They are highly crowded and sensitive to thematic sentiment; if expectations cool, they could drag on the index.

  Comparison

  Compared with stocks with lower AI sensitivity, AI-related stocks carry higher thematic risk and valuation pressure.

  Risks

  Capital expenditure returns falling short of expectations, delayed margin inflection, and changes in regulation and competitive dynamics.

• Low-momentum laggard stocks

  Hedging tool for momentum reversal

  Strengths

  Historical studies show that during sharp Momentum reversals, low-momentum stocks may outperform on a relative basis and generate absolute gains.

  Weaknesses

  They may continue to underperform if the momentum rally persists.

  Comparison

  Compared with chasing leaders, low-momentum stocks are more defensive and better suited to anti-crowding trades.

  Risks

  Weak fundamentals failing to improve, capital continuing to chase winners, and insufficient earnings revisions.

• Brent crude oil

  A key variable for global risk assets and inflation pressure

  Strengths

  Supply disruptions and the closure of the Strait of Hormuz support oil prices.

  Weaknesses

  High oil prices suppress consumption and growth and increase market volatility.

  Comparison

  Compared with normal commodity volatility, this oil price increase directly affects Asian and European equities and macro growth expectations.

  Risks

  Geopolitical escalation or de-escalation, supply chain disruptions, and slowing demand.

• China macro-related assets

  Affected jointly by April activity data and US-China relations

  Strengths

  If US-China relations remain stable and avoid renewed escalation in tariffs or sanctions, risk premiums may decline.

  Weaknesses

  April industrial, retail, and fixed asset investment data all came in weaker than expected.

  Comparison

  Compared with the US, the report shows China's near-term growth pressures are more pronounced.

  Risks

  Energy crisis shocks, renewed escalation of tariffs or sanctions, and deterioration in relations due to the Taiwan issue.

• European equities

  Affected by energy prices and slowing euro area growth

  Strengths

  Some sectors may find relative opportunities from energy, security, or infrastructure themes.

  Weaknesses

  1Q26 GDP grew only 0.1%, and growth expectations for 2Q-4Q26 are also sluggish.

  Comparison

  Compared with the US, Europe is more sensitive to energy price shocks.

  Risks

  Energy prices exceeding expectations and causing stagnation or contraction.

• HII

  Defense shipbuilding stock research summary

  Strengths

  Rated Buy, benefiting from the US Department of Defense's focus on naval shipbuilding, with a long-term target of 100% free cash flow conversion.

  Weaknesses

  Shipbuilding margins previously failed to improve meaningfully despite investment in wages, labor, and throughput improvements.

  Comparison

  Compared with general industrial stocks, HII is more directly exposed to the US naval shipbuilding budget.

  Risks

  Margin recovery falling short of expectations, changes in defense budget timing, and execution risk.

• YSWY

  New coverage summary for a convenience store operator

  Strengths

  The 15th-largest convenience store operator in the US, with plans to open more than 130 new stores over the next five years, plus in-store and fuel-station value-added initiatives and potential M&A.

  Weaknesses

  Rated Neutral; the key question is whether it can shift from acquisition-integration-led growth to organic growth.

  Comparison

  Compared with high-growth retail names, YSWY's valuation and strategic transformation require more validation.

  Risks

  Organic growth falling short of expectations, M&A integration risk, and pressure on lower-income consumers.

• NHP

  Research summary on senior housing and outpatient medical REIT

  Strengths

  Rated Buy, transitioning toward a pure senior housing portfolio and benefiting from record absorption and historically low supply.

  Weaknesses

  The transition is still underway, and it is sensitive to the cycle of the senior housing sector.

  Comparison

  Compared with diversified healthcare property REITs, NHP offers a more pure-play exposure to senior housing.

  Risks

  Execution of the operating transition, interest rate changes, and failure to realize M&A optionality.

Key data

• Front-month Brent oil price>$110/bblThe continued closure of the Strait of Hormuz has made oil prices a major source of pressure on equity markets in Asia and Europe.
• China April industrial productionMonth-on-month growth slowed by 160bpThe report says April activity data broadly came in below expectations.
• China April retail sales+0.2%The report says retail sales growth nearly stalled.
• China April fixed asset investment-8.2%Reflects the impact of the global energy crisis.
• Euro area 1Q26 GDP growth+0.1%Goldman Sachs expects similarly sluggish growth in 2Q-4Q26, with risk of stagnation or contraction if energy prices come in above expectations.
• Recent number of S&P 500 new highs14 times over the past monthThe rise in US equities has been driven mainly by AI trades.
• Contribution of AI trades to S&P 500 year-to-date returns85%The S&P 500 is up about 10% year to date, with AI trades contributing most of that.
• Momentum gain+25%Following the strong Momentum rally, the report warns of medium-term market weakness risk.
• S&P 500 consensus EPS forecastUp 8% year to date for both 2026 and 2027The report believes this momentum rally has been accompanied to some extent by earnings momentum.
• May NAHB housing market indexConsensus 34, prior 34The report highlights this data release as one to watch that morning.
• HII rating and target priceBuy, 12-month target price $435Benefiting from the US Department of Defense's focus on naval shipbuilding, with long-term free cash flow conversion potentially reaching 100%.
• YSWY rating and target priceNeutral, 12-month target price $28The company is the 15th-largest convenience store operator in the US, with growth coming from new store openings, in-store and fuel-station value-added projects, and potential M&A.
• NHP rating and target priceBuy, 12-month target price $20The company is transitioning to a pure senior housing portfolio, benefiting from high industry absorption and low supply.

Impact & implications

For portfolios, the message of the report is that investors should avoid indiscriminately chasing AI and Momentum trades in the near term. If earnings revisions continue to provide support, some high-quality growth stocks and names with upward earnings revisions may still warrant allocation; however, oil price shocks, slowing global growth, and rising market concentration mean portfolios should retain hedges, such as low-momentum laggards, stocks insensitive to AI trades, and names supported by earnings fundamentals rather than purely thematic drivers.

Risks

• The continued closure of the Strait of Hormuz could drive oil prices even higher, weighing on global growth and risk appetite.
• AI trades are overly concentrated, and a reversal in thematic sentiment could trigger a Momentum pullback.
• Market breadth has narrowed, making index gains overly dependent on a small number of large thematic stocks.
• Weak April activity data in China could heighten concerns about global demand and supply chains.
• European growth is near stagnation; if energy prices exceed expectations, there is a risk of stagnation or contraction.
• US-China relations remain affected by Taiwan, tariffs, sanctions, and commodity purchase commitments.
• If US housing data and other macro indicators come in weaker than expected, they could affect rates and cyclical stock pricing.
• Rising industry concentration driven by AI could create long-term uncertainty around competition, regulation, and profit distribution.

What to watch

• May NAHB housing market index, with market consensus at 34 and prior at 34.
• Whether Brent oil prices and the closure of the Strait of Hormuz ease.
• Whether follow-up data on China's industrial production, retail sales, and fixed asset investment can stabilize.
• Whether euro area growth in 2Q-4Q26 continues to hover near stagnation.
• Whether S&P 500 consensus EPS forecasts continue to be revised upward, especially 2026 and 2027 earnings expectations.
• Whether AI trades' contribution to index returns, market breadth, and Momentum indicators continue to deteriorate.
• Planned meetings between US and Chinese leaders in September, November, and December, and progress on tariffs, sanctions, and Taiwan-related issues.
• Subsequent management execution and target price realization for Goldman Sachs-listed companies such as HII, YSWY, and NHP.