Goldman Sachs Spots Historic Market Pattern Preceding Major Downturns
New York, Saturday, 16 May 2026.
Goldman Sachs warns that an extreme surge in stock momentum—a rare pattern observed only eight times since 1962—could signal a looming bear market by 2028.
The Anatomy of an ‘Up Crash’
During the week of May 12, 2026, the United States equity markets exhibited a volatility dynamic so unusual that Goldman Sachs analysts have dubbed it an ‘up crash’ [1][2][3]. Despite the S&P 500 advancing 7% over the past month and logging its 18th record close of the year on May 9, 2026, the Cboe Volatility Index (VIX) has remained surprisingly subdued, holding below 18 since mid-April [1][2][3]. Typically, rapid market ascents suppress implied volatility [GPT]. However, aggressive call-buying in the technology sector and broad-market hedging have pushed the correlation between the Nasdaq 100 index and its one-month call option to approximately 0.4 [2][3]. This positive correlation is a rare anomaly, marking only the fourth time it has occurred in the past decade [2][3].
A Rare Convergence of Risk and Momentum
While the immediate outlook appears lucrative, a broader macroeconomic analysis issued simultaneously by Goldman Sachs warns of brewing medium-term instability [1]. A separate team led by Andrea Ferrario reported that the firm’s Risk Appetite Indicator (RAI) surged to 1.1 during the week of May 12, 2026, reaching its highest point since 2021 [1]. To contextualize this extreme optimism, the RAI has only registered above 1.0 for 2% of the time since 1950 [1]. Concurrently, the iShares Edge MSCI USA Momentum Factor ETF has skyrocketed 33% from its March 30, 2026, trough, while the broader S&P 500 gained 18.25% over the same period, pushing the United States equity momentum z-score above 3.0 [1]. Ferrario’s team noted that this specific confluence of heightened risk appetite and momentum has not been witnessed since the beginning of 2000 [1].
Echoes of Volmageddon
Timing the exact peak of such momentum-driven markets remains notoriously difficult [GPT]. Goldman Sachs analysts caution that during similar historical setups in 1999 and 2021, equity prices continued to climb for approximately 12 months after the RAI and momentum indicators first breached these elevated thresholds before finally peaking [1]. A comparable scenario unfolded in 2017, when the correlation between the Nasdaq 100 and its call options last reached the current 0.4 level [2][3]. That year, the S&P 500 rallied 20% and the Nasdaq surged nearly 32%, while the VIX plummeted to an all-time low of 8.56 in November 2017 [2][3].
Navigating the Economic Paradox
Complicating the narrative for investors is the underlying resilience of the United States economy [GPT]. Despite the technical warning signs flashing in the equity and options markets, fundamental economic indicators remain relatively stable [alert! ‘Assuming stability based on lowered recession probability, but exact fundamental macroeconomic metrics are not detailed in the source’]. Reflecting this economic durability, Goldman Sachs economists recently reduced their 12-month probability of a United States recession to just 25% [1]. This creates a complex paradox for financial planners: the short-term economic outlook remains robust and corporate profits may continue to grow, yet the mechanics of market volatility and stretched valuations present a looming, structural threat to long-term portfolios [1][2][3].