An executive at the banking titan Citi says that the S&P 500 (SPX) is not done rallying after most financial institutions were caught off guard by the sudden stock market recovery.
In a new interview on CNBC Television, Stuart Kaiser, Citi’s head of US equity trading strategy, says that after the weekend’s productive trade talks between China and the US sent stocks soaring, the uptrend will likely continue.
“I think there’s still room to the upside. I think if you’re someone who’s less positive and doesn’t want to be long this market but prefer to be short, those folks are going to step out of the way, and they’re going to let the systematic buying from risk parity, from VolTarget and from CTAs (commodity trading advisors) play itself out. There’s no reason to fight that. Those are emotionless buyers, and they’re not fundamentally driven. So you let that play out. And how much is that worth? It’s hard to know.”
To support his bullish stance on the SPX, Kaiser reveals that a lot of institutional players missed out on the meat of the recovery, and they may aggressively open fresh positions in the event of a market pullback.
“I would not try to step in front of this rally. I think you have to let it play out. I think it can run from here, because the bottom line is most institutional investors captured very little, if any, of the rally we’ve had to date. We were half joking, but you only had to own the market for 60 trading minutes to capture the entire 17% rally off the low.
The flip side of that means, though, if you didn’t own it for those 60, you didn’t capture much of it. It’s not a FOMO (fear of missing out). It’s a fear of ‘I missed out.’
And the question I think now is, do we get engagement, another level of engagement to the upside, or do people hope they get a little pullback and are kind of aggressive dip buyers? So, you know, I think there’s more upside, but it’s not a clean trade.”
As of Tuesday’s close, the SPX is trading for 5,886.
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