Goldman Sachs Advises Overweight Cash to Hedge Market Volatility

Goldman Sachs is advising clients to maintain an overweight position in cash for the next three months to hedge against near-term market volatility. While the firm remains bullish on stocks for the coming year, strategist Christian Mueller-Glissmann identified artificial intelligence monetization, upcoming midterm elections, and Middle East tensions as the primary drivers of current risk.

This guidance follows a significant decline in AI-focused equities, including Alphabet, Meta Platforms, and Nvidia. These losses pushed the Nasdaq-100 index into correction territory, falling more than 10% from its record high reached on October 6.

Mueller-Glissmann stated that AI risk has dominated cyclical risk during this period. He suggested that investor risk appetite could improve if the market sees stronger evidence of AI monetization, a relief in interest rates, or a further decline in the firm's internal risk appetite indicator.