Banking giant warns the 2026 stock sell-off is not over

• January 2026 saw 108,435 job cuts, up 118% from January 2025 and the highest since the 2009 Great Recession, driven by big tech companies straining capital reserves on AI investments
• Goldman Sachs identifies thin liquidity and dominant net short positions as factors likely to magnify volatility and cause outsized losses in the second week of February
• AI investments require trillions in revenue by 2030 to pay off, a target many experts consider impossible, while major tech companies including Meta (reportedly firing up to 30,000 workers) continue mass layoffs

Summary

Goldman Sachs Warning on Market Volatility

Despite the S&P 500 posting its largest single-session gain since May 2025 on February 6, 2026, Goldman Sachs warns that market turbulence is far from over. The bank's trading desk indicates that trend-following algorithmic funds may dump approximately $33 billion in equities if the downtrend resumes. Thin liquidity and dominant net short positions could magnify volatility and trigger outsized losses in the second week of February.

Record Layoffs Signal Economic Stress

January 2026 jobs data reveals 108,435 job cuts—a 118% increase year-over-year and the highest since the 2009 Great Recession. Major technology companies including Meta, Amazon, and Microsoft announced significant workforce reductions in late 2025, while the Washington Post and another major employer are cutting up to 30,000 workers in early 2026.

AI Investment Concerns

Big Tech's massive AI investments are straining capital reserves while generating mounting job losses. Experts warn AI must generate trillions in revenue by 2030 for investments to pay off—a target many consider unrealistic. Semiconductor giant Nvidia reportedly abandoned a previously pledged $100 billion AI injection, and companies are omitting AI-related profits from forward guidance. 'Big Short' investor Michael Burry is among prominent voices scrutinizing AI sector risks.

Trade War Complications

President Trump's tariff policies have absorbed significant costs through American consumers, straining economic contribution and damaging long-standing trade relationships. Additional volatility looms as the U.S. Supreme Court may rule tariffs illegal, potentially collapsing the trade war framework.

Market Implications: Multiple converging factors—algorithmic selling pressure, employment deterioration, AI investment uncertainty, and trade instability—suggest continued market volatility ahead.