Kunal Shah, Goldman Sachs International’s co-CEO and the global co-head of the fixed income, currency, and commodities business, is issuing a warning on the US stock market.
In a new Goldman Sachs podcast, Shah says that despite a risk asset rally in the US and strong fundamentals supporting the uptrend, the “technicals” do not show an optimistic outlook going forward.
“The risk asset rally, particularly in the US, has been fierce. That recovery from April when we had all that chaos has been strong. I think it’s been pretty well grounded, earnings have been exceptionally strong. You’ve got the undercurrent of deregulation on its way. Obviously, the AI theme….
I would say that the rally thus far has its strong underpinnings. But I do think the technicals from here are less compelling. There was just a big re-risking from April, retail bought the dip, but our institutional clients definitely got defensive and they had to just chase that rally. But I think a lot of that underweight has been covered. The systematic buying, some of the best of that is behind us. The corporate buying, some of the best of that is behind us too.
So I don’t think the technicals are as favorable from here.”
According to Shah, the signs of a meme stock mania amid “flashpoints of froth” in the market are making him a “little bit more cautious.”
“Now again, these kind of overshoots can persist for some time. I’m not saying the structural undercurrents aren’t still positive. But I do think it is an opportune time to get a bit more defensive.”
A recent Reuters report cited department store chain Kohl’s, real estate flipper Opendoor Technologies, camera maker GoPro and restaurant chain Krispy Kreme as some of the equities that have poor fundamentals but are nonetheless rallying, driven by social media hype.
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