Equity Market Outlook & AI Capex (with Carol Massar, Tim Stenovec, Natalia Kenny Jovic)

Equity market is healthy with robust demand for offerings. Hedge funds are long AI/tech stocks but heavily hedged (most hedged ever), showing skepticism. Retail continues to buy unless job losses appear. Today's 2% selloff is a buying opportunity; S&P 500 has a clear path to 8000+ this year. Fundamentals justify valuations; earnings are solid.

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Goldman Sachs 9.0
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John Flood 9.0

Equity Market Outlook & AI Capex (with Carol Massar, Tim Stenovec, Natalia Kenny Jovic)

ndx

Despite today's selloff, Flood sees dips as buying opportunities. Hedge funds are long AI/tech names (though hedged). Fundamentals justify valuations. S&P 500 path to 8000+ implies tech (Nasdaq) will also rise.

rut

Flood notes retail continues to buy the market broadly. Dow Transports (often a proxy for small/mid-cap health) are up 1.3% today, led by FedEx, Union Pacific. Broad market strength suggests RUT participation.

John Flood

The market is very healthy in terms of supply and demand for offerings. Institutional demand for these offerings has never been more robust. This is a major reason we are constructive on the equity market despite 24 all-time highs.
John Flood

From an institutional perspective, there is still discipline. Hedge funds are long single stocks (AI/tech) but are more short macro products against those longs than ever in our data history. This shows healthy skepticism—they want to hold longs but are heavily hedged.
John Flood

Today's 2% selloff is a buying opportunity. There is profit-taking into the weekend and continued supply, but the strong jobs print moved rates higher and people now think we'll get a rate hike by year-end. There is still significant worry, cash on the sidelines, and short exposure for the market to climb higher.
John Flood

There is a slight disconnect between retail and institutional investors. Retail will continue to buy the equity market, especially with high-profile mega-cap IPOs in the pipeline. Retail only stops buying when there is true job loss—the last time they were net sellers for more than two consecutive weeks was March 2020.
John Flood

Disappointing earnings across the S&P 500 would give me pause. But we haven't seen any evidence of that; last quarter was solid and we are optimistic about next quarter.
John Flood

Systematic funds (CTAs) are relatively full on S&P 500 exposure. The highest velocity of buying is behind us. If we have several more down days, they will start selling. But their positioning is very small relative to retail, corporates, hedge funds, asset managers, and sovereign wealth funds. Other sleeves of demand outweigh them.
John Flood

We don't think the market is overly expensive. Memory (semiconductors) is one of the highest momentum sleeves and is still relatively fairly priced. There is real value to find outside the US (Korea, Taiwan) with room to run because fundamentals back it.

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