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The US stock market will rally further from recent all-time highs, Goldman Sachs’ John Flood says.
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Market tailwinds and seasonality suggest more opportunities ahead, with bullish sentiment not yet at its peak.
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Retail investors often offload stocks to cover taxes, causing market dips on Tax Day, with subsequent rebounds.
This year’s stock rally has more gas in the tank, according to a Goldman Sachs strategist.
John Flood, head of Americas equities sales trading at Goldman’s global banking and markets division, said in a briefing on Friday that investors fretting over a stock market bubble can relax, as he believes the S&P 500 set to soar further for four reasons.
First, the strategist predicts a late April market surge, as historical pattern traditionally see investors take gains ahead of tax season, leading to a temporary sell-off before a fresh uptick later in the month.
“Retail investors tend to sell stocks in order to pay their tax bills – meaning we often see the market slip into Tax Day, then rally afterwards,” he said.
Second, he pointed out that publicly-traded companies remain important buyers of their own stocks. In this case, the stock supply squeeze is poised to drive up huge market demand, fueling a forthcoming stock rally.
“The corporate buyback bid remains robust. We’re modeling $925 billion of repurchases this year,” he said, citing Goldman Sachs’ research.
Third, future confidence stems from money market funds, with a massive inflow of $1.6 trillion occurring since 2023. This indicates to Flood that “there’s still plenty of dry powder out there” for investors to deploy into the stock market.
Finally, Flood notes that the current sentiment isn’t screaming “all-time bullish” just yet, as hedge funds have recently seen money flowing out. Peak bullishness tends to be a contrarian indicator that says the next move for stocks is likely down, but the market isn’t there yet.
“Hedge funds have been net sellers of stocks, and have picked up their shorting activity significantly in recent weeks,” he said.
Read the original article on Business Insider