GOLDMAN SACHS: Lagging fund inflows can drive the stock market even higher

By Ben Winck

  • The stock market is having room to run even higher this year despite a 29% gain in 2019 and warnings of a reversal, Goldman Sachs analysts wrote.
  • Fund inflows are lagging the surge in US equities, leaving plenty of cash to fuel additional market records, the team said in a Tuesday note.
  • The investment bank also noted that traditionally safer assets like government bonds and cash haven’t yet seen “meaningful outflows,” suggesting that “a large portion of positioning has still not moved into equity.”
  • Watch Goldman Sachs trade live here.

The US stock market has surged to record highs numerous times throughout the new year, and Goldman Sachs views a few factors as fuel for driving prices even higher.

While retail investors have piled back in to the historically long bull market, mutual funds and exchange-traded funds have lagged in shifting their positioning to equities, the team of strategists including Alessio Rizzi and Christian Mueller-Glissmann said.

“This suggests that there may still be room for a more bullish rotation alongside the better growth/rates mix we expect,” the Goldman strategists wrote in a Tuesday note. The gap between market advances and fund inflows is among the largest on record, the team added.

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