Interview with Goldman Sachs Head of U.S. Equity Business: How Much Further Can the U.S. Stock Bull Run Go?

Video Title: Why US Stocks Could Climb Higher

Video Host: Chris Hussey, The Markets

Editor: Peggy

Editor's Note: As US stocks approach historic highs, AI trading remains crowded, and interest rate expectations are once again disrupting valuations, market discussions are shifting from "can tech stocks still rally" to "what structure is actually supporting this rise." With buying the dip almost becoming an investor reflex, a more critical question emerges: is the current rally driven by short-term sentiment, or has it already formed deeper cycles of capital, earnings, and supply-demand dynamics?

This article is compiled from a conversation on the Goldman Sachs podcast "The Markets." In the program, host Chris Hussey sat down with John Flood, Head of Americas Equity Sales Trading in Goldman Sachs' Global Banking & Markets division, to discuss US stock market volatility, IPO supply, buybacks, semiconductor trading, interest rate risks, and earnings momentum.

In this conversation, John Flood's core analysis breaks down the question of "whether US stocks can continue to rise" into a set of more fundamental structural issues: whether capital is still willing to absorb supply, whether earnings will continue to materialize, whether interest rates will disrupt the valuation balance, and whether the crowded AI trade has been proven false.

First, volatility has shifted from a risk signal to a result of capital reallocation. In the past, rising volume and market volatility were often seen as precursors to weakening trends. However, in Flood's view, recent volatility does not necessarily mean cracks are appearing in tech stock trading. The US market saw a single-day volume of 34 billion shares, the highest on record. This reflects not panic in one direction, but a simultaneous portfolio adjustment by retail, institutional, and corporate investors. Especially before technical events like the Russell Index rebalancing, volatility is more a manifestation of portfolio restructuring. This means, as long as capital is still rotating within the market, a pullback doesn't necessarily signal the end of a trend and could continue to be a buying window.

Second, supply pressure has not crushed the market, indicating a stronger bid structure than meets the eye. Previously, IPOs and large-scale financing were often interpreted as draining liquidity from the secondary market. However, two high-profile issuances in June, with a combined notional size of $140 billion, barely put pressure on the market. This suggests that new supply is being absorbed by relatively strong demand. More importantly, retail investors have been a consistent buyer this year, and institutions have shown clear demand for large issuances. Meanwhile, corporate buybacks are spreading from the Mag Seven to a broader range of S&P 500 companies. The buyback force, once dominated by a few tech giants, is now showing horizontal diffusion, making the supply-demand structure of US stocks less reliant on a handful of top tech names.

Third, AI-related trades remain crowded, but congestion itself is not yet a reason for a reversal. Over the past year, semiconductors, memory, semiconductor equipment, and the Asian tech supply chain have become the market's clearest themes, with capital expressing AI trades through exposures like South Korea and Taiwan. But in Flood's view, a trade is crowded because it's still delivering results. The current risk isn't that the market doesn't know this theme is hot; it's that until the AI earnings momentum is proven false, capital struggles to find a more compelling alternative. The fact that some Mag Seven stocks are being used as a source of funds to rotate into other positions might actually create new entry points.

Fourth, interest rates remain the most obvious disruptive variable for this bull market. Previously, the market focused mainly on growth and earnings. But with the Fed meeting leaning hawkish and the market pricing in about 40 basis points of rate hikes for the year, rates have re-emerged as a key constraint on valuation. Flood's assessment here is not extreme: if there are no further rate hikes this year, the market might reprice "holding steady" as a form of disguised easing. In other words, the real risk of rates isn't just the absolute level, but whether it deviates from the path already priced in by the market.

Fifth, earnings remain the hardest underlying logic for the bull market. Past tech stock rallies were easily attributed to sentiment and valuation expansion. But the median S&P 500 stock saw earnings grow 14% in the first quarter, one of the strongest quarters in decades. Market expectations for the second quarter point to roughly 9% year-over-year growth. If earnings season continues to approach this level, then the rally isn't just a valuation trade but the result of continued upward earnings revisions. Whether the S&P 500 can break through 8,000 points ultimately depends on whether this earnings curve can continue to validate.

If one were to distill this conversation into a single judgment, it would be: the current strength of US stocks stems not just from the AI narrative, but from the structural support formed by capital supply-demand dynamics, corporate buybacks, earnings growth, and interest rate expectations. In this sense, the subject of this discussion is no longer just one Goldman Sachs trader's view on the short-term market, but the question of how a bull market continues to find support amidst high valuations, high crowding, and high interest rate uncertainty.

Below is the original content (edited for readability):

TL;DR

· Rising US stock volatility does not equal a trend reversal; Goldman Sachs traders are more inclined to view pullbacks as buying opportunities after capital reallocation.

· The surge in IPO supply hasn't weighed on the market, indicating current buying pressure comes not just from a few tech stocks but is underpinned by institutional, retail, and corporate capital collectively.

· Buyback demand is spreading from the Mag Seven to a broader range of S&P 500 companies, making the US stock supply-demand structure more stable than the surface-level "issuance pressure" suggests.

· Semiconductors, memory, and the Asian tech supply chain remain the most crowded trades, essentially because the AI earnings momentum hasn't been disproven, and capital is still willing to tolerate volatility.

· Interest rates are the biggest risk variable for US stocks. If there are no rate hikes this year, the market could reprice "holding steady" as a positive development.

· The core of this bull market remains earnings, not sentiment. As long as Q2 earnings continue to deliver growth, the logic for the S&P 500 to challenge 8,000 points remains intact.

Conversation Content

Chris Hussey: Welcome to The Markets. I'm Chris Hussey. It's Thursday, June 25th. I'm here on the Goldman Sachs trading floor with John Flood, Head of Americas Equity Sales Trading in Global Banking & Markets. Floody, thanks for joining us.

John Flood: Thanks for having me.

Volatility Will Continue, But US Stocks Still in "Buy the Dip" Mode

Chris Hussey: So, I know you're focused on many things, and we'll get to all of them. But let's start with this week's market, as volatility seems to be picking up again. How are you seeing it? Are cracks starting to appear in tech stock trading? Or is this a buy-the-dip opportunity?

John Flood: I still believe we are in a "buy the dip" mode. Reminder, tomorrow is the Russell Index rebalancing, and usually, you see waves of volatility leading up to that event.

Also, a week ago, exactly one week back from today, while we were talking about the Knicks parade, which was great – go Knicks – the US traded 34 billion shares across all stock exchanges. That was the busiest trading day in stock market history, beating the record set on "Liberation Day" in 2025.

That tells me that there are various types of investors adjusting their portfolios, whether it's retail, institutional, or corporate capital, all reallocating. So, I think volatility will persist, but the overall market trend is still upward. Dips will continue to offer decent buying opportunities.

Chris Hussey: That's remarkable. I hadn't realized that, that you had 2 million people watching the Knicks parade downtown, and at the same time, stocks had their biggest trading day ever.

That's fascinating. Good thing we don't have to be on the floor of the NYSE physically calling out trades anymore, because that would have been a tough day for operation.

Alright, let's talk about supply, as it's a big factor in the market right now. IPOs are clearly heating up. What does this recent spate of high-profile new issuances mean for the market?

IPO Supply Surges: Why the Market Can Handle It

John Flood: Yeah, we saw two high-profile deals within two weeks in June. Combined, their notional size was $140 billion, making them the first and second largest primary market financings in US history over a two-week span. Remarkable.

But the equity market barely flinched. On our desk, we've seen clear institutional demand for these offerings. More importantly, on the retail side – we talk a lot with clients about this – retail has been the most consistent buyer of equities all year. I feel like retail buying is accelerating as these high-profile IPOs get done. I expect this trend to continue for the rest of the year.

Chris Hussey: Okay. The other side of supply, of course, is the other side of the issuance coin, which is buybacks and M&A. M&A environment is strong, and buybacks, you might be less sure about given how much the market has run. Are they sufficient to offset these issuances?

John Flood: The short answer is: sufficient. And this might surprise a lot of people because when we talk about buybacks historically, you'd mainly hear about the "Mag Seven" dominating the activity.

But on our corporate buyback desk, we are seeing buying spreading out, which is a positive sign. Two years ago, if the buyback desk had an active day, there might be 10 buyback programs running. This year, it's more like 50 to 60 programs running.

So, it's not just the Mag Seven; relatively smaller companies across the S&P 500 are starting to participate in buybacks. I think this trend persists.

My gut is, even if some of the Mag Seven companies pause buybacks this year, we could still be on track for a record year in terms of notional amount and number of companies buying back stock.

Chris Hussey: Makes sense. Okay, John, enough about supply, let's get to the themes. You're tracking a lot of different things simultaneously. What's grabbing your attention most?

John Flood: I'm still focused on semiconductors and semiconductor equipment. That's where everyone is, and where everyone still wants to be.

We're seeing a lot of capital expressing this trade through Asian exposures, specifically Korea and Taiwan. As we just said, when a trade gets crowded, gets hot, and has obviously done very well, it naturally comes with volatility. But I think the upward trend will continue.

Semiconductors, memory, Asia – those are the keywords.

At the same time, we are seeing some supply come into the Mag Seven as people need to free up capital for semiconductors, other parts of tech, and some of the IPO trades. So, I actually think there are some attractive entry points within the Mag Seven right now. You've seen hedge funds shorting the Mag Seven, or using it as a source of funds to create capacity for this new supply.

S&P 500 Reaching 8,000: Key Factors Are Earnings and Rates

Chris Hussey: Yeah, that's a good point. The Mag Seven is practically the Top 10 now, with three massive semiconductor stocks each having a market cap over $1 trillion.

Alright, let's put on our rates hat. I know you're an equity guy, but the other big theme in the market is the Fed. Warsh presided over his first June meeting as Fed Chair. How are you thinking about interest rates, and how will they impact stocks?

John Flood: Actually, I started my career as a rates trader at Lehman Brothers in 2006.

Chris Hussey: Ah.

John Flood: Didn't end too well, though.

Chris Hussey: I didn't know that. I also started at Lehman.

John Flood: That was a long time ago.

Right now, the market is worried about rates continuing to move higher. I just walked over from the desk, and the market is now pricing in about 40 basis points of rate hikes between now and the end of the year.

Chris Hussey: Wow.

John Flood: I would say, that's probably the number one concern that could break this rally: higher inflation, higher rates than expected. I think this Fed meeting was more hawkish than the market anticipated.

But I also think we have the best team of economists on Wall Street. They don't believe we'll see a rate hike this year. And at this point, if rates stay unchanged from now until the end of the year, the market will actually treat that as a rate cut.

However, I do think we need to keep a very close eye on rates. That's the variable everyone is truly worried about. I align with our economists' view that there will be no hikes. That would be positive for equities.

Chris Hussey: Yeah, if the market is pricing in 40 basis points of hikes and they don't materialize, I think that would be very positive.

Alright, let's think about the immediate future. It's hard to believe, but next week we wrap up the first half, the second quarter, and June. On the earnings momentum front, what's the read on the upcoming earnings season?

John Flood: Earnings have been the driving force of this bull market. We believe earnings will continue to propel the market higher. This is really the core of our bullish thesis.

In Q1, the median S&P 500 stock saw earnings grow 14%. That's one of the best quarters in decades. Q2 earnings are upon us soon, and the current expectation for the median stock is 9% year-over-year growth.

If the final result is close to that, and clears that hurdle, which we think it will, then earnings will continue to tell the same story: the fundamental backdrop is still supportive for the market to move higher.

So, earnings have been fantastic. We think they'll continue to be good. We'll see what Q2 delivers.

Chris Hussey: That's a great point. We just had one of the strongest quarters for earnings growth. If anyone is wondering why stocks are making new highs, there's your simple answer.

Alright, let's wrap up. What's your favorite trade right now?

John Flood: My favorite trade right now is to keep leaning into what's working.

Momentum trades are crowded now, but they're crowded for a reason. This includes semiconductors, and by extension, semiconductor equipment. I think parts of Korea and Taiwan will continue to perform well.

So, between now and the end of the year, I like staying in trades that have already proven themselves. I also think the S&P 500 has a real chance to break through 8,000 in the near term. Because as we discussed, there are a lot of technical factors creating a tailwind. And most importantly, earnings are very good and should remain so.

Chris Hussey: I have to ask, though, you mentioned Korea. It was down 10% in one day this week. Doesn't that shake your confidence?

John Flood: No.

Chris Hussey: I love that answer. That's FOGO – Fear Of Getting Out. Alright, what are you watching next week, as we close out the first half and head into July?

John Flood: I don't want to sound completely one-sided and not mention any headwinds.

So for next week, as we said, the first half concludes. There are some technical factors that could be near-term headwinds for the market. One of them is pension rebalancing. Simply put, pensions need to adjust their portfolios to bring stocks and fixed income back into their target allocations.

Because stocks have performed so much better than fixed income, this pension rebalancing will result in roughly $30 billion of US equity selling. Next Monday, June 29th, and Tuesday, June 30th, are the last two trading days of the first half, and that creates a short-term headwind.

So don't be surprised if the market shows some weakness early next week. But again, that could also present a decent buying opportunity.

Chris Hussey: That's a fascinating catalyst that not everyone will have on their radar. I really like that observation.

One final question, because July brings the World Cup final. I know you love all sports. Who's going to win the World Cup?

John Flood: USA all the way, buddy.

Chris Hussey: Alright, why not? And it's July 4th next week. That's it for this edition of The Markets. I'm Chris Hussey. Thanks for listening.

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