While the rally charges ahead, not all voices are convinced it has staying power. Morgan Stanley’s Lisa Shalett sees a turning point ahead, arguing that the rebound in tech-heavy indices is masking deeper cracks in fundamentals. She points to slowing revenue growth among the Magnificent Seven and weakening EPS momentum across the board. Since peaking in December, top AI names have faced rising capital expenditures, falling free-cash-flow yields, and what she calls a “capex arms race” that may not end well. While the White House’s tariff pause lit the fuse under the April rally, Shalett believes much of the AI-driven upside is now priced in—and urges clients to rotate into under-owned sectors like financials, energy, and healthcare. Her view adds to the growing divide: on one end, people are piling back into tech; on the other, Wall Street veterans are looking to diversify.
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In sharp contrast, Goldman Sachs is doubling down on the rally. Their desk raised its S&P 500 target to 6,500, citing improving fundamentals, tariff de-escalation, and a dovish inflation backdrop. They argue this rally isn’t overbought—it’s under-owned. Commodity Trading Advisors (CTAs)—quant funds that adjust equity exposure based on price trends—are projected to inject $25B into markets over the next month, while institutional net holdings remain near their lowest levels since last summer.
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Even as sentiment shifts, core positioning hasn’t caught up. April’s “Liberation Day” selloff reset exposure, and now, with macro data stabilizing and inflation surprising to the downside, Goldman is calling for a continued squeeze higher. Their tactical playbook? Stick with MegaCap Tech as the default risk trade, and don’t fight the tape just yet. But with the S&P already up ~20% since the April lows, it’s becoming a momentum game—where lagging investors are being forced in, largely due to FOMO.
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Meanwhile, the underlying story is that there is growing stress at the lower end of the income spectrum, as evidence by rising delinquency rates across all major debt categories. As student loan forgiveness and FHA loan forgiveness programs carried out for years under the Biden Administration have been shut off, financial stress is creeping into the banking system.
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Most economic analyses focus on lagging indicators. But the earliest signs of trouble often come from industries closest to day-to-day consumer behavior—places where spending is casual, tips are common, and splurges are discretionary.
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Escorts, strippers, bartenders, DoorDash drivers, and even hairstylists are feeling a shift. Fewer tips, fewer clients, and more bargaining are starting to define 2025’s consumer mood.

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