Goldman Sees Fear of Underperforming as Retail Returns

(Bloomberg) -- Traders are keeping a close eye on flows into equities from the retail crowd as stocks hover near record highs and meme stocks popped and then fizzled this week. 

“I am starting to have conversations regarding FOMU, fear of materially underperforming, this week heading into a positive trading window for the ‘US 60/40 portfolio,’” Scott Rubner, global markets division managing director and tactical specialist at Goldman Sachs Group, Inc., wrote in a note to clients Friday. 

On Thursday, off-exchange volume, which shows the percentage of all US equities traded after the market close, reached 51.6%. That surpassed the prior peak of 50% in January 2021. 

“As a reminder, households own 39% of the $78 trillion US equity market in cash equities and 65% inclusive of mutual funds and ETF’s,” Rubner wrote. “I would generally be running a lower short portfolio in this tape.”

The rise in retail interest in stocks coincides with the return of meme stocks and Keith Gill, the retail-trading icon who goes by the moniker “Roaring Kitty” and drove the original mania three years ago before disappearing from social media in June 2021. 

On Sunday, Gill sent a cryptic post on the social media platform X and sparked a furious rally in two former meme stock darlings, GameStop Corp. and AMC Entertainment Holdings Inc. By Tuesday, GameStop was up 179% and AMC had gained 135%, and the whole market was talking about the return of the meme stock frenzy. 

Then from Wednesday to Friday, GameStop plunged 57% while AMC sank 36%, as traders unloaded their positions — although both stocks remained up significantly over the five sessions. Indeed, AMC had its best week since August 2022.

“The biggest equity owner, US civilian households, just chalked up a win vs. the bears,” Rubner wrote. “Watch inflows into SPY and QQQ next week.” 

(Corrects firm’s name in second paragraph.)

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