Banking giant Goldman Sachs says one crucial economic data point could shatter the confidence of retail investors.
In a new episode of the bank’s Thoughts on the Markets podcast, John Flood, head of Americas Equities Execution Services in Goldman Sachs Global Banking & Markets, says that February’s negative jobs print could be an ominous signal for the US stock market.
Data from the Bureau of Labor Statistics shows that the US labor market shed 92,000 jobs last month, after a 126,000 increase in January.
Flood believes that retail investors will start pulling back on buying stocks if the labor market continues to flash signs of weakness.
“People care about jobs data. We have had a negative jobs print in the last reading. We think it was a relative one-off due to weather, strikes and some other technicals we can get into at another time.
But bottom line, we have to watch jobs very closely because we think that the retail community stops buying stocks when there’s job loss. So, hopefully, the negative jobs print was a one-off.
If you start to see two, three, four consecutive poor jobs prints, you could potentially see that retail bid, which has been so consistent, wobble that would make us uncomfortable.”
The bank’s warning comes as fellow banking titan JPMorgan Chase says retail investors are starting to show signs of buying fatigue. In a research note dated March 12th, a team led by market analyst Arun Jain says retail inflows dropped to $6.7 billion in the last five trading days through Wednesday, significantly below the 12-month average of $7.1 billion.
“For the first time this year, retail investors are showing persistent signs of weakness. Monday marked the largest net-selling day in single stocks in a month, before purchases resumed at a positive, yet below year-to-date average pace on Tuesday and Wednesday.”
Jain’s team adds that retail investors have been buying the dip in plays tied to AI and data centers.
“Consistent with this rotation, retail investors bought technology and consumer discretionary this week, including Nvidia, Broadcom, Microsoft, Oracle, Tesla and Palantir.”
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