Goldman’s Lee Coppersmith identifies the sharpest deterioration in global risk appetite since November 2021, yet the positioning data tell a more complicated story. Hedge funds have reduced directional exposure without meaningfully reducing leverage, earnings remain surprisingly resilient, and the AI investment cycle is beginning to influence everything from corporate cash flow to Treasury yields.
• October delivered one of the largest monthly declines in Goldman’s Risk Appetite Indicator in two decades, but the market has yet to reach the extremes normally associated with a contrarian opportunity.
• Hedge funds have cut their directional exposure while maintaining historically elevated gross leverage, leaving an important source of potential volatility beneath the surface.
• Strong corporate earnings are increasingly failing to support the market’s most crowded positions, as investors shift their attention from AI growth to the cost of financing it.
• The relationship between equities, volatility and Treasury yields is changing, creating unusually wide potential outcomes in both directions.