Goldman Sachs sees upside potential building in one stock group that saw significant selling over the past weeks amid concerns of overvaluation.
In a new episode of the bank’s This Is the Markets podcast, Goldman Sachs managing director Lee Coppersmith says investor sentiment is now shifting to FOMO, or the fear of missing out, as the S&P 500 is now up about 8% from its 2026 low of 6,316.
According to Coppersmith, the FOMO is mostly coming from investors who dumped positions during the height of the AI-disruption fears and rising Middle East hostilities.
“Now we have seen a pretty large reset in the geopolitical volatility risk premium that was once associated with the market when we were trading 5% lower. But what I would tell you is that the level of positioning today is still much more friendly and conducive for the market continuing to rally versus where we were call it around quarter end.
And so I do think for clients, there hasn’t even been enough time to fully digest the ramifications of what this ceasefire might mean. And so given the backdrop of where they now are, I think the right tail has actually intensified from them because they feel like they have actually taken down exposures to a level where they’ll miss out if the market were to continue rallying.”
Coppersmith says the correction over the past month or so has opened a window of opportunity in the Mag 7 names, saying the stock group is now a buy amid lower valuations and lighter positioning with earnings season in sight.
“I think both locally here and over the medium term, the level of valuations, the light positioning, and the fundamentals that have always been associated with these companies all remain incredibly friendly. And so to put it all in one wrap, I think, honestly, clients should be looking at expressing a lot of this upside through the call options market, which is recently a lot lower into what should be a pretty catalyst-rich season for these companies.”
The Mag 7 is one of the more beaten-down stock groups this year, as investors worried about the profitability of the massive AI CapEx. The Roundhill Magnificent Seven ETF (MAGS), which tracks the Mag 7’s performance, dropped more than 17% this year, before erasing some of its losses this month.
As of Friday’s close, MAGS is trading at $61.14 and the S&P 500 is at 6,816.
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