Goldman Sachs believes the stock market is in an ideal setup for the latter half of the year, with investors already pricing in a 'Goldilocks' scenario of balanced economic growth.
However, the bank highlights three potential risks that could disrupt the market in the coming months: economic growth shock and stagflation, interest rate shock, and further declines for the US dollar.
The risk of an economic growth shock leading to stagflation is a concern, particularly due to potential tariff impacts and the worsening growth/inflation mix.
Investors should also be cautious about the potential for an interest rate shock and further declines for the US dollar, which could impact risk assets like stocks.