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