tl;dr
Kunal Shah, co-CEO of Goldman Sachs International, warns that despite strong earnings and positive fundamentals like deregulation and AI, technical indicators suggest a cautious outlook for the US stock market. He notes that the recent rally was driven by retail and institutional investors but belie...
Kunal Shah, co-CEO of Goldman Sachs International and global co-head of the fixed income, currency, and commodities business, has issued a cautionary note on the US stock market. Despite a robust risk asset rally supported by strong earnings and positive fundamentals such as deregulation and the AI theme, Shah warns that the technical indicators suggest a less optimistic outlook moving forward.
He highlights that the recent aggressive rally from April was fueled by retail investors buying the dip and institutional investors chasing the rally after a period of defensiveness. However, he believes much of the systematic and corporate buying momentum has already peaked, weakening the technical foundations of continued upward movement.
Adding to his cautious stance, Shah points to signs of a meme stock mania and market froth characterized by speculative rallies in companies with weak fundamentals. Examples include Kohl’s, Opendoor Technologies, GoPro, and Krispy Kreme, which have surged largely due to social media hype rather than solid financials.
While acknowledging that structural market undercurrents remain positive, Shah advises investors to consider a more defensive approach in light of these technical warning signs and potential overshoots that may persist. His perspective urges a balanced view, weighing strong fundamentals against the risks of a stretched market.