A recent Goldman Sachs (GS) report revealed a slowdown in retail investor activity, potentially paving the way for an influx of short sellers. Yahoo Finance anchor Julie Hyman breaks down the details of these findings and what they could mean for markets and investors heading into earnings season.
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This post was written by Angel Smith
Video Transcript
Retail investor activity has declined and it’s likely emboldening short sellers.
That’s according to a new report by Goldman Sachs.
Yahoo finance is Julie Hyman joins me now with a closer look, Julie.
Yeah, we earlier talked to Goldman Sachs Derivatives research had John Marshall who helped outline what exactly this means.
And this is something that Goldman Sachs does measure on a regular basis and it’s not that unusual of move going into earnings, but really the thrust of the report was that investors need to be careful about which stocks they are betting on going into earnings because we’ve been seeing some outsized movements in them last earnings season and they expect to see that this earnings season again.
So here, what we’re looking at is single stock options volume and this goes back uh uh really a couple of years here and we’ve been seeing a little bit of decline as of late in that activity now at the same time that that’s been happening, Goldman Sachs also has an index of retail sentiment and that has been sort of going sideways to even ticking up as the single stock options go down.
John Marshall said that that indeed could indicate that hedge funds might have an opportunity to step in here with some shorting activity.
Here’s what he told us earlier.
Now, it’s not our call that the S and P is necessarily going to decline here, but weak stocks, stocks with weak fundamental stocks that have high leverage.
We think hedge funds are gonna be more emboldened to short those stocks as we’re entering earning season because there’s less of that threat of a short squeeze from retail and the options market.
And that’s evidenced by that decline in that single stock option activity, that less threat of a short squeeze as we have a retail sentiment that is relatively strong right now, at least according to this particular measure, Josh.
All right.
Thank you, Julie.