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Goldman: Market Volatility is the New Normal
11 Apr
Summary
- Market concentration, driven by AI, is at its highest since the Great Depression.
- Goldman Sachs predicts a structural rise in stock volatility.
- Rising unemployment rates are identified as a key driver of market swings.
Goldman Sachs strategists project that stock market volatility is shifting to a new structural norm. While recent Middle East conflicts have increased short-term volatility, underlying forces are expected to sustain higher market swings long-term. These include a significant concentration of value in AI-related sectors, pushing market concentration to levels not seen since the Great Depression in 1932. This AI-driven concentration, similar to the late 1990s tech boom, raises risks as market focus intensifies on AI's justification for high valuations. Another primary driver identified is a slowly rising unemployment rate. Goldman's models show a statistically significant link between labor market data volatility and equity volatility, indicating increased uncertainty about the macroeconomic outlook. These "non-macro" factors of concentration and high valuations, alongside employment trends, are reshaping the volatility landscape.
