Not even 1999 yet
GS traders say tech rally to continue
How quickly the narrative can change. A week ago we felt that this was bubble style early 2000 and now apparently it is not even 1999. Goldman's traders says that the tech rally will continue in the near term. The chart above goes much further than that showing, that this rally is still far more subdued than the great melt-up of 1999 and 2000. Which side of 99 are you on?
Why GS sees a continued tech grind higher
1. There is room to re-risk. Ahead of the NVDA print, the GS trading desk noted HF de-risking activity in tech
2. Tech has fully decoupled from yields. Nasdaq has been unphased in front of higher rates (see chart)
3. We are entering a window of lighter calendar news and peak dealer gamma. This bodes well for a lower velocity grind higher and vol compression/normalization.
Source: Refinitiv
One of the lamest bubbles we've ever seen
"Although some parts of the market are exhibiting elements of animal spirits in aggregate we are very far bubble territory at least for the large cap names by way of valuation (if this is a bubble its one of the lamest one’s we’ve ever seen...NDX at 35x trailing 12m...in the late 90s tech bubble it went into the 90s!)" (Privorotsky, GS)
Maybe just the start
In 1994, the surge in IT capex and productivity started a multi-year uptrend for Nasdaq.
Source: Macrobond
Party like it’s 1995? IT driven productivity growth
In the mid-90s, the first wave of IT-driven productivity growth allowed growth to boom.
Source: Macrobond
Late to the party or the trend is your friend...?
The Magnificent 7 are now up ~1,700% since 2015 compared to the S&P 500's ~140% gain. Even the Nasdaq Composite Index, the largest tech index in the world, is up just ~230% since 2015.
Source: Deutsche Bank
Not even expensive
Here focusing on software. EV/NTM Sales multiples remain below the 5-yr median though now is on par with the 10-yr median.
Source: BofA
What about positioning?
Tech positioning
Mega-cap growth & Tech positioning at 94th percentile but still a little off highs from the heydays of 2021.
Source: Deutsche Bank
So just how elevated is HF positioning in Tech?
In reality the answer is somewhat nuanced – pretty high…but not necessarily at extreme levels.
1. L/S ratio in Mag7 stocks is back up at 83rd %-tile (having hit < 20th %-tile late last year), and longs now outweigh shorts by 6.6x – however the L/S ratio was as high as 11.5x back in Sep 2021.
2. The L/S ratio in US Semis stocks is even more elevated at the 98th %-tile, but at 2.1x it’s below levels reached in Jun/Jul of last year. (JPM QDS)
Largest tech selling in >8 months
US Info Tech was by far the most net sold sector on the GS Prime book this week, driven by short sales and to a lesser extent long sales (3.5 to 1). This week’s net selling in the sector was the largest since July and ranks in the 97th percentile versus the past five years. (GS Prime)
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