00:00John, I just want to get your thoughts on where we are in maybe a cycle here. And I'm struck
00:05by
00:05the news of Meta Platform shares down right now, the company weighing a big equity raise
00:09after that blockbuster Google deal that we got earlier this week, $85 billion in a share sale.
00:15John, I know I'm not going to get you to comment on an individual company, but comment on what it
00:20means to you when you have huge mega cap tech companies doing share sales or possibly doing
00:27share sales like this. What signal does it tell you? Signal tells me that it's a very healthy market
00:33right now in terms of the supply and demand that's out there in the marketplace. And I think that we've
00:39seen, you know, I speak with institutions at Goldman Sachs, institutional investors,
00:44and there's never been more robust demand for these offerings. And my expectation is that trend
00:50continues. And that's a major piece of why we are very constructive. This equity market,
00:56despite S&P 500 already making, you know, 24 all-time highs, we expect more of that to come
01:03in the future. So, John, how do we know, though, that it isn't just a case of FOMO and people
01:08just
01:09chasing? I mean, it's so much money, so much momentum in terms of the AI spend and build,
01:14debt side, equity, tapping markets. We heard from the Bloomberg Technology folks yesterday,
01:18a big conference, lots of major players in the AI space saying demand is incredible. They adjust the
01:24momentum. How do we know, though, that it's not just kind of a major, major FOMO trade and that
01:30there's going to be some kind of reality or reckoning coming in the near future? Because from the
01:34institutional investor perspective, we actually still see a lot of discipline out there. There's
01:40still, I think, a wall of worry left to climb higher in this market. What we look at is our
01:45prime
01:45brokerage data. And one of the most important pieces out there right now, I think, is gross
01:51exposure. So, essentially, hedge funds are still long. A lot of their single stocks, AI, tech, exposed
01:58names. They're also more short macro products against these longs than they ever have been in the
02:04history of our data set. What that tells me is there's still healthy skepticism about what is going
02:10to happen next. I want to hold my longs, but I want to make sure I'm hedged. And it's essentially
02:16the most hedged we've ever seen hedge fund clients at Goldman Sachs on the equity floor.
02:21John, what is your take, actually, on today's stock market sell-off? Because we hear lots of
02:25conversations about some market participants, you know, taking profits off the table because they're
02:31prepping for this huge wave of big tech IPOs. So, what is your take? And what does Goldman also think?
02:38Is it a buying opportunity? Is it time to buy the dip? I think that there have been few and
02:43far
02:44dips to buy so far this year. So, yes, when you have a 2% sell-off in the S
02:50&P 500, it has paid to
02:52buy those dips. And I think that will continue. I think today you have some profit-taking into the
02:59weekend ahead of what is likely going to be continued supply, as evidenced by the news that just broke.
03:05But really, we had a strong jobs print this morning. And I would say, what are the fears that
03:10people continue to list as top concerns? It's inflation, it's Iran, it's private credit. And
03:17this morning's jobs print, you know, has rates moving higher. And people now think that we will
03:24get a rate hike by year-end. So, I think it's healthy. I do think it's a buying opportunity.
03:30And I think that there is still a significant amount of worry, cash on the sidelines, short
03:36exposure out there for the market to climb higher.
03:40Got it. You know, I also wanted to ask you about one indicator tracked by Goldman Sachs that
03:46basically tracks all positioning across hedge funds, long-only investors, retail funds. It is
03:52interesting because the stock market is at all-time high. At the same time, positioning is still at a
03:57neutral level, which means that there is more room to run. So, first of all, please tell me why is
04:02that? Why positioning is still so low and what it means for the stock market direction?
04:07It's likely a tailwind, and that's exactly what we said. Despite us being close to all-time highs
04:12at the index level, from an institutional investor perspective, there is still concern out there. We see
04:18that through gross exposure being at all-time high, expressed through a lot of short hedges in macro
04:23product, and from mutual fund cash balances. If you look at notional dollars that remain on the sidelines
04:30for mutual funds, we are still at a long-term average. It's not an outlier. So, when you look at
04:38hedge fund exposure, you look at mutual fund cash, there's still plenty of skepticism left out there.
04:44That's why our sentiment indicator is showing healthy positioning, not overextended positioning.
04:49John, that makes me happy that there's some negative sentiment out there. I get very nervous.
04:54You know, we're just at this tech event. We talked a lot about AI, Haktanov, Broadcom was here. I mean,
05:00all of the major players, and there was a lot of enthusiasm, I think it's safe to say, with some
05:05cautiousness, but a lot of enthusiasm. Having said that, because of what you are seeing, particularly
05:11among institutional investors and hedge funds, do you think the retail investor and markets overall
05:16are not really thinking that we could see some kind of pullback or mini-correction as a result?
05:21I think that there is a slight disconnect between the retail investor right now and the
05:27institutional investor. That being said, I think that retail will continue to buy the equity market,
05:35as we have some mega-cap IPOs likely in the pipeline between now and year-end. We'll see how that
05:41plays out.
05:42But these are high-profile companies that typically grab the attention of retail. And once retail starts
05:49buying, they don't really stop unless there is true job loss. Our data shows that that retail bid
05:56disappears when there is job loss. And the last time that we saw retail as a net seller of the
06:03U.S.
06:03equity market for more than a consecutive week was back in March of 2020 during the depths of COVID.
06:09So really, you have to watch employment. You have to watch jobs. And until we start to see job
06:16destruction, that retail bid will likely remain a healthy constant in the marketplace.
06:23Well, we certainly got a positive print today in that arena. John, I'm wondering though,
06:29what would give you pause, apart from job losses, what would give you pause with an equity rally such as
06:34this?
06:35If we started to get disappointed in earnings, and frankly, we continue to see companies clear these
06:42hurdles. Last quarter, earnings were solid. We are optimistic about next quarter. If you start to see
06:49earnings holistically across the S&P 500 disappoint, that would be highly concerning to me. We haven't
06:56seen any evidence of that. We aren't bracing for any evidence of that in the near term.
07:02I have to ask you, John, about systematic funds. Because as we remember in March,
07:08this market was really driven by technical factors. What does your data tell us right now about how
07:15positioning looks like across CTAs, wall control funds? And what does it mean again for the stock
07:22market direction? Systematic funds have had a solid year of performance. And right now they are
07:28relatively full in terms of S&P 500 exposure. This is an incredibly momentum driven community.
07:35And right now, as the market moves higher, they will continue to add. That being said,
07:41the highest velocity of buying is behind us. If we do take a turn lower, you know, have several more
07:47days
07:47of what we're going through today, you will see that CTA community start to sell the equity market.
07:53That being said, the systematic positioning in the marketplace is very small relative to retail,
08:01relative to corporates, relative to hedge funds, asset managers, sovereign wealth funds. So that
08:06would be one noteworthy piece of supply. We think all the other sleeves of demand outweigh that in a
08:13move lower. I agree. But at the same time, when they sell, you really feel it because they do it
08:17so
08:17quickly. Correct. So again, regarding today's sell-off, we see that the S&P 500 basically is now
08:23trading P-E ratio closer to long-term average. So do you feel that the market right now is fairly
08:30priced in ahead of the next earnings season? We don't think it's overly expensive. We get this
08:36question in terms of, you know, are we optimistic on earnings? Yes. We get this question within memory
08:41space all the time. And we still think memory, one of the highest momentum sleeves of the market right
08:48now, is still relatively fairly priced. And we see that with our institutional clients right now.
08:53There's a ton of focus in Korea, in Taiwan, outside of the US. And there's still real value to find,
09:03even though some of these markets appear to have gone up and to the right, there's still room to run
09:07because the fundamentals back it. Hey, John, just, oh gosh, go ahead, Natalia. No, no, please go ahead, Carol.
09:14Hey, well, I've just got to ask John. We've just got about 30, 40 seconds. We obviously want like an
09:19hour with you because this is all incredible. Come back. The IPO, Cerebris IPO, that was the biggest.
09:25We're getting ready for the SpaceX IPO, Anthropic IPO. I'm just watching. I know you can't talk specifics,
09:31but does any of this smell a little bit like a top of the market or does it all feel
09:36justified and
09:36fundamentally justified? And again, just got about 30 seconds. As of right now, we still think that
09:42fundamentals justify what we're seeing go on in the equity market. So yes, like we are constructive
09:49on our desk. We think S&P 500, we think these dips are buying opportunities and we think that there's
09:55a clear path to 8,000 and beyond this year.
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