Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: As you know, trading news.
Speaker 3: A lot of things keep us honest and all bullish
Speaker 3: things must come to an end. We're certainly seeing that
Speaker 3: in the trade today, tim or at least a little
Speaker 3: bit of a breather.
Speaker 1: Yeah, as we've been reporting, as you just heard from
Speaker 1: Charlie wall Street's historic weekly run, poised to come to
Speaker 1: a halt. Stocks and bonds falling after that solid jobs
Speaker 1: report added to speculation the Fed's next interest rate move
Speaker 1: could actually be a hike.
Speaker 3: All right, So let's get into the trade now that
Speaker 3: we know what the backdrop is. Right now, Natalia Kenny
Speaker 3: Javich is with us Bloomberg News Equities reporter.
Speaker 2: She's back at home base in.
Speaker 3: Bloomberg headquarters in New York City, along with John Flood.
Speaker 3: He's Goldmeza's partner and head of America's equities execution services.
Speaker 2: As we said, both back in New York City.
Speaker 1: Hey John, Natalia, good to have you both with us. John,
Speaker 1: I just want to get your thoughts on where we
Speaker 1: are in maybe a cycle here, and I'm struck by
Speaker 1: the news of Meta platform shares down right now, the
Speaker 1: company weighing a big equity raise after that blockbuster Google
Speaker 1: deal that we got earlier this week, eighty five billion
Speaker 1: dollars in a share sale. John, I know I'm not
Speaker 1: going to get you to comment on an individual company,
Speaker 1: but comment on what it means to you when you
Speaker 1: have huge megacap tech companies doing share sales or possibly
Speaker 1: doing share sales like this, what signal does it tell you?
Speaker 4: Signal tells me that it's a very healthy market right
Speaker 4: now in terms of the supply and demand that's out
Speaker 4: there in the marketplace. And I think that we've seen
Speaker 4: you know, I speak with institutions at Goldman Sachs Institutional Investors,
Speaker 4: and there's never been more robust demand for these offerings.
Speaker 4: And my expectation is that trend continues, and that's a
Speaker 4: major piece of why we are very constructive this equity market.
Speaker 4: Despite s and P five hundred already making you know,
Speaker 4: twenty four all time highs, we expect more of that
Speaker 4: to come in the future.
Speaker 3: So, John, how do we know though, that it isn't
Speaker 3: just a case of fomo and people just chasing. I mean,
Speaker 3: it's so much money, so much much momentum in terms
Speaker 3: of the AI spend and build debt side equity tapping markets.
Speaker 3: We heard from the Bloomberg technology folks yesterday a big
Speaker 3: conference lots of major players in the AI space saying
Speaker 3: demand is incredible.
Speaker 2: They just the momentum.
Speaker 3: How do we know, though, that it's not just kind
Speaker 3: of a major, major fomo trade and that there's going
Speaker 3: to be some kind of reality or reckoning coming in
Speaker 3: the near future.
Speaker 4: Because from the institutional investor perspective, we actually still see
Speaker 4: a lot of discipline out there. There's still, I think
Speaker 4: a wall of worry left to climb higher in this market.
Speaker 4: What we look at is our prime brokerage data, and
Speaker 4: one of the most important pieces out there right now,
Speaker 4: I think is gross exposure. So essentially hedge funds are
Speaker 4: still long a lot of their single stocks at AI
Speaker 4: tech exposed names. They're also more short macro products against
Speaker 4: these lungs than they ever have been in the history
Speaker 4: of our data set. What that tells me is there's
Speaker 4: still healthy skepticism about what is going to happen next.
Speaker 4: I want to hold my lungs, but I want to
Speaker 4: make sure I'm hedged, and it's essentially the most hedged
Speaker 4: we've ever seen. Hedge fund clients at Goldman Sachs on
Speaker 4: the equity For.
Speaker 5: John, what is your take actually on today's stock market
Speaker 5: sell off? Because we hear lots of conversations about some
Speaker 5: market participants, you know, taking profits of the table because
Speaker 5: they're prepping for this huge wave of big tech IPOs.
Speaker 5: So what is your take and what does Goldman also think?
Speaker 5: Is it a buying opportunity? Is it time to buy
Speaker 5: the dip?
Speaker 4: I think that there have been few and far dips
Speaker 4: to buy so far this year, So yes, when you
Speaker 4: have a two percent sell off in the S and
Speaker 4: P five hundred, it is paid to buy those dips.
Speaker 4: And I think it continue and I think that will continue.
Speaker 4: I think today you have some profit taking into the
Speaker 4: weekend ahead of what is likely going to be continued supply,
Speaker 4: as evidenced by the news that just broke. But really
Speaker 4: we had a strong job sprint this morning, and I
Speaker 4: would say, what are the fears that people continue to
Speaker 4: list as top concerns. It's inflation, it's Iran, it's private credit.
Speaker 4: And this morning's jobs print, you know, has moved, has
Speaker 4: rates moving higher, and people now think that we will
Speaker 4: get a rate hike and buy your end. So it
Speaker 4: is I think it's healthy. I do think it's a
Speaker 4: buying opportunity, and I think that there is still a
Speaker 4: significant amount of worry cash on the sideline short exposure
Speaker 4: out there for the market to climb higher.
Speaker 5: Got it, you know. I also wanted to ask you
Speaker 5: about one indicator tracked by Golden Sacks. It basically tracks
Speaker 5: all positioning across hedge funds, long only investors, retail funds.
Speaker 5: It is interesting because the stock market is at all
Speaker 5: time high at the same time, positioning is still at
Speaker 5: a neutral level, which means that there is more room
Speaker 5: to run. So, first of all, please tell me why
Speaker 5: is that, why positioning is still so low and what
Speaker 5: it means for the stock market direction.
Speaker 4: It's likely a tailwind, and that's exactly what we said.
Speaker 4: Despite us being close to all time highs at the
Speaker 4: index level, from an institutional investor perspective, there is still
Speaker 4: concern out there. We see that through gross exposure being
Speaker 4: at all time high, expressed through a lot of short
Speaker 4: hedges in macro product and from mutual fund cash balances.
Speaker 4: If you look at notional dollars that remain on the
Speaker 4: sidelines for mutual funds, we are still at you know,
Speaker 4: we're still at a long term average. It's not like
Speaker 4: there's it's not an outlier. So when you look at
Speaker 4: hedge fund exposure, you look at mutual fund cash, there's
Speaker 4: still plenty of skepticism left out there. That's why our
Speaker 4: sentiment indicator is showing healthy positioning, not over extended positioning.
Speaker 3: John, that makes me happy that there's some negative sentiment
Speaker 3: out there. I get very nervous. You know, We're just
Speaker 3: at this tech event. We talked a lot about AI Hottana,
Speaker 3: Broadcom was here, I mean all of the major players.
Speaker 2: And there was a lot of enthusiasm.
Speaker 3: I think it's safe to say, with some cautiousness, but
Speaker 3: a lot of enthusiasm. Having said that, because of what
Speaker 3: you are seeing, particularly among institutional investors in hedge funds,
Speaker 3: do you think the retail investor in markets overall are
Speaker 3: not really thinking that we could see some kind of
Speaker 3: pullback or many correction As a result.
Speaker 4: I think that there is a slight disconnect between the
Speaker 4: retail investor right now and the institutional investor. That being said,
Speaker 4: I think that retail will continue to buy the equity
Speaker 4: market as we have some megacap IPOs likely in the
Speaker 4: pipeline between now and your end, we'll see how that
Speaker 4: plays out. But these are high profile companies that typically
Speaker 4: grab the attention of retail, and once retail stops starts buying,
Speaker 4: they don't really stop unless there is true job loss.
Speaker 4: Our data shows that that retail bid disappears when there
Speaker 4: is job loss. And the last time that we saw
Speaker 4: retail as a net seller of the US equity market
Speaker 4: for more than a consecutive week was back in March
Speaker 4: of twenty twenty, during the depths of COVID. So really,
Speaker 4: like you have to watch the you have to watch employment,
Speaker 4: you have to watch jobs, and until we start to
Speaker 4: see job destruction, that retail bid will likely remain a healthy,
Speaker 4: a healthy constant in the marketplace.
Speaker 1: Well, we certainly got a positive print today in that arena. John,
Speaker 1: I'm wondering, though, what would give you pause apart from
Speaker 1: job losses, what would what would give you pause with
Speaker 1: an equity rally such as this.
Speaker 4: If we started to get disappointing in earnings and frankly,
Speaker 4: we continue to see companies clear these hurdles. Last quarter
Speaker 4: earnings were solid. We are optimistic about next quarter. If
Speaker 4: you start to see earnings holistically across the S and
Speaker 4: P five hundred disappoint That would be highly concerning to me.
Speaker 4: We haven't seen any evidence of that. We aren't bracing
Speaker 4: for any evidence of that in the near term.
Speaker 5: I have to ask you, John about systematic funds, because,
Speaker 5: as we remember in March, this market was really driven
Speaker 5: by technical factors. What does your data tell us right
Speaker 5: now about how positioning look like looks like across CTA's
Speaker 5: wall control funds, and what does it mean again for
Speaker 5: the stock market direction.
Speaker 4: Systematic funds have had a solid year of performance and
Speaker 4: right now they are relatively full in terms of S
Speaker 4: and P five hundred exposure. This is an incredibly momentum
Speaker 4: driven community and right now, as the market moves higher,
Speaker 4: they will continue to add. That being said, the highest
Speaker 4: velocity of buying is behind us. If we do take
Speaker 4: a turn lower, you have several more days of what
Speaker 4: we're going through today, you will see that CTA community
Speaker 4: start to sell the equity market. That being said, the
Speaker 4: systematic positioning in the marketplace is very small relative to retail,
Speaker 4: relative to corporates, relative to hedge funds, asset managers, sovereign
Speaker 4: wealth funds, So that would be one noteworthy piece of supply.
Speaker 4: We think all the other sleeves of demand outweigh that
Speaker 4: in a move lower.
Speaker 5: I agree, But at the same time, when they sell,
Speaker 5: you really feel it because they do it so quickly. Correct.
Speaker 5: So again I got in today's sale off, we see
Speaker 5: that the S and P five hundred, basically it's now
Speaker 5: trading P ratio closer to long term average. So do
Speaker 5: you feel that the market right now is fairly priced
Speaker 5: in ahead of the next earning season.
Speaker 4: We don't think it's overly expensive. We get this question
Speaker 4: in terms of, you know, are we optimistic on earnings. Yes,
Speaker 4: we get this question within memory space all the time,
Speaker 4: and we still think Memory, one of the highest momentum
Speaker 4: sleeves of the market right now, is still relatively fairly priced.
Speaker 4: And we see that with our institutional clients right now.
Speaker 4: There's a ton of focus in Korea, in Taiwan, outside
Speaker 4: of the US, and it's there is still you know,
Speaker 4: there's still real value to find. Even though some of
Speaker 4: these markets appear to have gone up into the right,
Speaker 4: they're still room to run because the fundamentals back it.
Speaker 3: Hey, John, just oh gosh, go ahead, and time please
Speaker 3: go ahead, Carol, Hey, Well, I've just got to ask John.
Speaker 3: We just got about thirty forty seconds. We obviously want
Speaker 3: like an hour with you because this is all incredible.
Speaker 3: The IPO cerebras IPO that was the biggest, We're getting
Speaker 3: ready for the SpaceX IPO, anthropic IPO just watching.
Speaker 2: I know you can't talk specifics.
Speaker 3: But does any of this smell a little bit like
Speaker 3: a top of the market or does it all feel
Speaker 3: justified and fundamentally justified?
Speaker 2: And again, just got about thirty seconds.
Speaker 4: As of right now, we still think that fundamentals justify
Speaker 4: what we're seeing go on in the equity market. So yes,
Speaker 4: like we are constructive on our desk, we think S
Speaker 4: and P five hundred. We think these dips are buying opportunities,
Speaker 4: and we think that there's a clear path to eight
Speaker 4: thousand and beyond this year.
Speaker 2: Wow.
Speaker 3: All right, John Flood, thank you so much, gol Matza's partner,
Speaker 3: head of America's equities execution Services. I hope you will
Speaker 3: grace us with coming back again and joining us. Natalia
Speaker 3: Kenny Javitch of course too, and really appreciate it. She
Speaker 3: is Bloomberg News equities reporter back there at Bloomberg headquarters