00:00Comment on what it means to you when you have huge mega cap tech companies doing share sales
00:06or possibly doing share sales like this. What signal does it tell you?
00:10Signal tells me that it's a very healthy market right now in terms of the supply and demand
00:16that's out there in the marketplace. And I think that we've seen, you know, I speak with
00:22institutions at Goldman Sachs, institutional investors, and there's never been more robust
00:27demand for these offerings. And my expectation is that trend continues. And that's a major piece of
00:34why we are very constructive. This equity market, despite S&P 500 already making, you know, 24 all
00:40time highs, we expect more of that to come in the future. So, John, how do we know, though, that
00:46it
00:46isn't just a case of FOMO and people just chasing? I mean, it's so much money, so much momentum in
00:52terms
00:52of the AI spend and build, debt side, equity, tapping markets. We heard from the Bloomberg
00:57Technology folks yesterday, a big conference, lots of major players in the AI space saying
01:02demand is incredible. They adjust the momentum. How do we know, though, that it's not just kind
01:07of a major, major FOMO trade and that there's going to be some kind of reality or reckoning
01:12coming in the near future?
01:14Because from the institutional investor perspective, we actually still see a lot of discipline out
01:20there. There's still, I think, a wall of worry left to climb higher in this market. What we look at
01:25is our prime brokerage data. And one of the most important pieces out there right now, I think, is
01:31gross exposure. So, essentially, hedge funds are still long. A lot of their single stocks, AI, tech
01:38exposed names. They're also more short macro products against these longs than they ever have been in
01:45the history of our data set. What that tells me is there's still healthy skepticism about what is
01:50going to happen next. I want to hold my longs, but I want to make sure I'm hedged. And it's
01:56essentially
01:56the most hedged we've ever seen hedge fund clients at Goldman Sachs on the equity floor.
02:01John, what is your take, actually, on today's stock market sell-off? Because we hear lots of
02:05conversations about some market participants, you know, taking profits off the table because they're
02:11prepping for this huge wave of big tech IPOs. So, what is your take? And what does Goldman also
02:18think? Is it a buying opportunity? Is it time to buy the dip?
02:22I think that there have been few and far dips to buy so far this year. So, yes, when you
02:28have a 2%
02:29sell-off in the S&P 500, it has paid to buy those dips. And I think it continue. And
02:35I think that
02:35will continue. I think today you have some profit taking into the weekend ahead of what is likely
02:41going to be continued supply, as evidenced by the news that just broke. But really, we had a strong
02:47jobs print this morning. And I would say, what are the fears that people continue to list as top
02:53concerns? It's inflation. It's Iran. It's private credit. And this morning's jobs print, you know,
03:00has rates moving higher. And people now think that we will get a rate hike by year end. So,
03:07I think it's healthy. I do think it's a buying opportunity. And I think that there is still
03:13a significant amount of worry, cash on the sidelines, short exposure out there for the market to climb
03:20higher. Got it. You know, I also wanted to ask you about one indicator tracked by Goldman Sachs. It
03:26basically tracks all positioning across hedge funds, long-only investors, retail funds. It is
03:33interesting because the stock market is at all-time high. At the same time, positioning is still at the
03:37neutral level, which means that there is more room to run. So, first of all, please tell me why is
03:42that? Why positioning is still so low and what it means for the stock market direction?
03:47It's likely a tailwind. And that's exactly what we said. Despite us being close to all-time highs
03:52at the index level, from an institutional investor perspective, there is still concern out there. We
03:58see that through gross exposure being at all-time high, expressed through a lot of short hedges in
04:03macro product, and from mutual fund cash balances. If you look at notional dollars that remain on the
04:10sidelines for mutual funds, we are still at, you know, we're still at a long-term average. It's not
04:16like there's, it's not an outlier. So, when you look at hedge fund exposure, you look at mutual fund
04:21cash, there's still plenty of skepticism left out there. That's why our sentiment indicator is showing
04:26healthy positioning, not overextended positioning.
04:29John, that makes me happy that there's some negative sentiment out there. I get very nervous.
04:35You know, we're just at this tech event. We talked a lot about AI, Hocktana, Broadcom was here. I mean,
04:40all of the major players, and there was a lot of enthusiasm, I think it's safe to say, with some
04:46cautiousness, but a lot of enthusiasm. Having said that, because of what you are seeing, particularly
04:51among institutional investors and hedge funds, do you think the retail investor and markets overall
04:56are not really thinking that we could see some kind of pullback or mini-correction as a result?
05:03I think that there is a slight disconnect between the retail investor right now and the institutional
05:07investor. That being said, I think that retail will continue to buy the equity market, as we have
05:16some mega cap IPOs likely in the pipeline between now and year-end. We'll see how that plays out.
05:23But these are high-profile companies that typically grab the attention of retail. And once retail starts
05:29buying, they don't really stop unless there is true job loss. Our data shows that that retail bid
05:36disappears when there is job loss. And the last time that we saw retail as a net seller of the
05:43U.S.
05:44equity market for more than a consecutive week was back in March of 2020, during the depths of COVID.
05:49So really, you have to watch employment, you have to watch jobs. And until we start to see job
05:57destruction, that retail bid will likely remain a healthy constant in the marketplace.
06:03Well, we certainly got a positive print today in that arena. John, I'm wondering, though,
06:09what would give you pause, apart from job losses, what would give you pause with an equity rally such
06:14as this?
06:15If we started to get disappointed in earnings. And frankly, we continue to see companies clear these
06:22hurdles. Last quarter, earnings were solid. We are optimistic about next quarter. If you start to see
06:30earnings holistically across the S&P 500 disappoint, that would be highly concerning to me. We haven't
06:37seen any evidence of that. We aren't bracing for any evidence of that in the near term.
06:42I have to ask you, John, about systematic funds, because as we remember in March, this market was
06:49really driven by technical factors. What does your data tell us right now about how positioning looks
06:57like, looks like across CTAs, wall control funds? And what does it mean again for the stock market
07:02direction?
07:03Systematic funds have had a solid year of performance. And right now, they are relatively full
07:09in terms of S&P 500 exposure. This is an incredibly momentum-driven community. And right now, as the
07:17market moves higher, they will continue to add. That being said, the highest velocity of buying is behind
07:23us. If we do take a turn lower, you know, have several more days of what we're going through
07:28today, you will see that CTA community start to sell the equity market. That being said, the systematic
07:36positioning in the marketplace is very small relative to retail, relative to corporates, relative to
07:43hedge funds, asset managers, sovereign wealth funds. So that would be one noteworthy piece of supply.
07:49We think all the other sleeves of demand outweigh that in a move lower.
07:54I agree. But at the same time, when they sell, you really feel it because they do it so quickly.
07:59Correct.
07:59So again, regarding today's sell-off, we see that the S&P 500 basically is now trading
08:04P-E ratio closer to long-term average. So do you feel that the market right now is fairly priced
08:11in ahead of the next earnings season?
08:14We don't think it's overly expensive. We get this question in terms of, you know,
08:18are we optimistic on earnings? Yes. We get this question within memory space all the time.
08:23And we still think memory, one of the highest momentum sleeves of the market right now,
08:29is still relatively fairly priced. And we see that with our institutional clients right now.
08:33There's a ton of focus in Korea, in Taiwan, outside of the US. And it's,
08:39there is still, you know, there's still real value to find, even though some of these markets appear
08:45to have gone up and to the right, there's still room to run because the fundamentals back it.
08:50Hey, John, just, oh gosh, go ahead, Natalia.
08:53No, no, please go ahead, Carol.
08:55Hey, well, I've just got to ask, John, we've just got about 30, 40 seconds. We obviously want
08:59like an hour with you because this is all incredible.
09:00Come back.
09:01Incredible. The IPO, Cerebris IPO, that was the biggest. We're getting ready for the SpaceX IPO,
09:07Anthropic IPO, just watching. I know you can't talk specifics, but does any of this
09:12smell a little bit like a top of the market or does it all feel justified and fundamentally
09:17justified? And again, just got about 30 seconds. As of right now, we still think that fundamentals
09:23justify what we're seeing go on in the equity market. So yes, like we are constructive on our desk.
09:30Uh, we think S and P 500, we think these dips are buying opportunities and, and we think that
09:35there's a clear path to 8,000 and beyond this year.
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