- Goldman Sachs’ John Flood believes the U.S. stock market will continue to rise from recent highs.
- Market tailwinds and seasonality suggest further opportunities ahead, even though bullish sentiment has not yet peaked.
- Individual investors often sell stocks to cover taxes, causing a market decline on tax day and then a rebound.
Goldman Sachs strategists say this year’s rally has led to more gasoline being stored.
John Flood, head of Americas equity sales and trading in Goldman’s Global Banking and Markets division, said in a press conference on Friday that he believes the S&P 500 will rise further for four reasons: He said worried investors can rest assured.
First, strategists are predicting a market rally in late April, which traditionally leads to a temporary decline before rising again later in the month as investors take profits before tax season. This is because there are historical patterns.
“Retail investors tend to sell stocks to pay taxes, which means the market often slides on tax day and then rebounds,” he said.
Second, he noted that listed companies remain important buyers of their own stock. In this case, the tight supply of stocks will push up huge demand in the market, spurring future stock price increases.
“Corporate share buyback bids remain strong, with $925 billion in stock buybacks planned this year,” he said, citing a Goldman Sachs study.
Third, confidence in the future comes from money market funds, which have seen massive inflows of $1.6 trillion since 2023. This shows Flood that “there’s still a lot of dry powder” that investors can deploy in the stock market.
Finally, Flood notes that recent sentiment has not yet screamed “all-time bullish” given the recent outflows from hedge funds. Bullish peaks tend to be contrarian indicators, indicating that the next move in a stock is likely to be lower, but the market is not there yet.
“Hedge funds have been shorting the stock, and we’ve seen a significant uptick in short-selling activity in recent weeks,” he said.
