Original author: Zhao Ying

Original source: Wall Street Insight

Goldman Sachs' chief U.S. equity strategist’s latest assessment shows that the current market exuberance level has risen to the historical 86th percentile, approaching but not yet reaching the extreme levels of the 2000 internet bubble and the peak of the 2021 bull market.

In the past two months, the S&P 500 index has soared 15% before the pullback on Friday, a gain that ranks in the 99th percentile of historical data since 1980. Goldman Sachs chief U.S. equity strategist Ben Snider pointed out in his latest report that although the four major historical signals of a bull market peak—speculative frenzy, deteriorating growth, large-scale stock issuance, and tightening Fed policy—are not yet fully established, each is closer to its triggering threshold than it was months ago.

For the market, this judgment means there is still room in the current bull market, but risks are accumulating. Snider explicitly stated, "We are not there yet," while warning that the market does not need to wait for extreme investor exuberance to experience a downturn, as historical patterns may not necessarily replay in this cycle.

Strength of the rally: Strongest rebound after volatility adjustment in 50 years

The speed of this rebound has left a mark in history. According to Goldman Sachs data, the S&P 500 index rose 15% in about two months, with the realized volatility's return/volatility ratio close to 4, the highest level in over 50 years.

Artificial intelligence is the core theme driving this rally. AI concept stocks, momentum factors, and major indices have all surged in unison, creating a high degree of resonance.

Snider noted that, unlike previous momentum-driven rallies (such as late 1999 and late 2021), this rise has been primarily supported by a significant upward revision of recent earnings expectations, rather than merely an emotional bubble, which to some extent gives this rally a more solid fundamental underpinning.

Exuberance indicator: 86th percentile, below two historical peaks

To quantify the current market sentiment, Snider constructed a comprehensive assessment framework covering four major categories and nine indicators. Historical data shows that at the peak of the 2000 internet bubble, the median ranking of these indicators reached the historical 100th percentile; at the 2021 bull market peak, it was at the 95th percentile. The current reading stands at the 86th percentile—above historical average, but there remains a significant gap compared to the previous two extreme peaks.

Specifically, Goldman’s speculative trading indicators have risen recently, but are still below the levels at the end of 2025, and far below the peaks of 2000 and 2021. Among various speculative trading activities, the trading volume of overvalued stocks has recently seen a noticeable increase, while trading activity in loss-making stocks remains relatively mild. Additionally, the trading volume of call options and the retail financing balance are both on the rise, indicating that investor sentiment is warming up.

It is worth noting that the breadth of the current rebound is extremely narrow, but has not yet reached the extreme concentration level seen during the internet bubble.

Four major risk signals: Not yet triggered, but gap is narrowing

Goldman’s analytical framework attributes the end of historically overvalued and concentrated bull markets to four types of factors: speculative frenzy, deteriorating growth prospects, extreme stock issuance, and Fed policy tightening. Snider pointed out that none of these four conditions are fully met in the current environment, but each is closer to the warning line than it was at the beginning of the year.

IPO activity is warming up, and pressure from stock issuance is beginning to emerge; rising input costs are compressing corporate profit margins, posing a potential threat to growth prospects; the pricing in the interest rate market has begun to reflect the rising probability of Fed interest rate hikes, although Goldman economists believe the actual likelihood of rate hikes is low.

Snider also emphasized that a market downturn does not require extreme investor exuberance as a prerequisite, and the euphoric characteristics observed at past bull market peaks may not necessarily reappear in the same form in this cycle. This means that even if current indicators have not yet reached historical extremes, investors should not view this as a sufficient guarantee of a margin of safety.

Overall, Goldman’s assessment provides a cautious but not pessimistic judgment: the level of exuberance in this bull market is "getting closer" to the historical peak range, but has not yet arrived. The key supporting this assessment is that the current rise still has improving earnings expectations as a fundamental endorsement, rather than being purely driven by sentiment. However, as momentum factors remain strong, market concentration remains high, and some risk signals quietly heat up, Snider's report essentially prompts investors: the window is still open, but it is slowly narrowing.

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