Goldman Sachs concerned by how quickly market confidence has recovered

The speedy return of market confidence following a dramatic global sell-off in risky assets should be seen as a cause for concern, according to the head of asset allocation research at Goldman Sachs.

Speaking to CNBC’s “Squawk Box Europe” on Wednesday, Goldman’s Christian Mueller-Glissmann said investors could think about the early August stock slump as something akin to “a warning shot.”

Stock markets kicked off the month under intense pressure, as concerns over a possible U.S. recession and the unwind of popular “carry trades” linked to the Japanese yen pulled stocks off their record levels. The S&P 500 lost 3% on Aug. 5, notching its biggest one-day drop since 2022.

Since then, however, expectations of imminent interest rate cuts from the Federal Reserve and improving U.S. economic data have sent stocks soaring. The S&P 500 has jumped 8% since Aug. 5, while the Dow Jones Industrial Average has climbed more than 6%.

“Going into this, you had like one or two months where positioning and sentiment was at the upper end of the range. People were bullish,” Mueller-Glissmann said.

“We were actually worried about a bit of a correction because at the same time, while you had bullish positioning, momentum on the macro was a bit weaker. You had negative U.S. macro surprises for like 1½ months before that, and you actually started to see Europe and China macro surprises turn negative as well,” he added.

“What’s concerning now is how quickly the market has gone back to where we were before, and we can discuss that, but certainly that shows that we are sadly nearly back to the same problem we were at a month ago.”

It comes after Fed Chair Jerome Powell said late last week that “the time has come for policy to adjust,” bolstering expectations for a rate cut at the central bank’s Sept. 18 meeting. Powell declined to provide exact indications on the timing or extent of the cut.

Asked where that leaves risk appetite for the coming months, Mueller-Glissmann replied, “What happened on Aug. 5 and around there was obviously a huge technical overreaction … so that was a buying opportunity.”

He said the current challenge for market participants is that stocks and risky assets have “completely reversed” losses to get back to where they were before.

“What I find quite interesting is risk appetite is not back to where we were before and what actually happened is that safe assets — bonds,…