Investing.com -- Goldman Sachs said in a note Tuesday that it is dialing back its risk exposure across asset classes, citing recent tariff de-escalation and macroeconomic developments while favoring cash over commodities in the near term.
In a research note on Tuesday, Goldman analysts said, “With less near-term downside risk we shift more neutral on equities and bonds for 3m but remain OW cash/UW commodities to lower risk.”
The bank continues to advocate a “defensive asset allocation,” reflecting lingering concerns about elevated policy uncertainty and uneven global growth momentum.
The reassessment follows a series of developments, including a “positive China trade negotiation outcome with a 90-day pause” and a new trade agreement with the U.K.
These have contributed to easing market volatility, with Goldman noting that the VIX “dropped below 20, its lowest level since April 2nd,” and that the “VIX and MOVE index had one of the sharpest 4-week resets since 1990.”
Despite a rebound in U.S. equities—particularly among the “Magnificent 7” stocks—Goldman remains cautious.
“The asymmetry for equities does not appear attractive,” the bank wrote, noting that while first-quarter earnings were strong, macro surprises have been more positive in Europe than in the U.S.
Coming into the second quarter, Goldman had already taken a conservative stance, “suggesting a modest overweight to cash, depending on risk tolerance, considering equity drawdown risk.”
That bias is said to remain intact as the firm sees “still slowing growth with rising inflation” under its updated economic baseline.
Looking ahead, Goldman continues to recommend “selective defensive overlay strategies including protective option hedges” following the volatility reset.