Markets primed for possible further declines: Goldman president Waldron

[SINGAPORE] Goldman Sachs Group president John Waldron said markets are primed for possible further declines and investors will be keeping close tabs on the upcoming key earnings report from technology leader Nvidia.

“It strikes me the market could pull back further from here,” Waldron said in an interview on the sidelines of the Bloomberg New Economy Forum in Singapore on Wednesday (Nov 19). “I do think the technicals are kind of more biased for more protection, and more downside.”

The S&P 500 is down more than 3 per cent this month, on course for its worst month since March, while volatility has surged. A sell-off in the world’s largest technology companies has reignited a debate on AI, and whether it is generating enough revenue or profit to justify the massive spending on infrastructure.

“You’re seeing in the markets right now a pullback, which I think is healthy – markets have run quite a bit this year,” he said on Bloomberg Television. “Markets are heavily focused on this AI dynamic: are we going to get the returns on capital invested that the market expects, and is that priced in? That’s a big debate.”

Nvidia’s earnings later on Wednesday “will be a very important moment for the markets,” he added.

Earlier, Bob Diamond, who’s also attending the forum, said turmoil in global markets in recent days resembles a “healthy correction” as investors grapple with how to assess elements of technological change.

“We’ve seen risk assets be repriced,” said Diamond, the former chief executive officer of Barclays who now runs investment firm Atlas Merchant Capital. “In my sense, this is a healthy correction, not something that’s turning into a bear market.”

Diamond also said fiscal spending that’s led to elevated sovereign debt piles “is a dark cloud” hanging over markets.

Wall Street’s so-called fear gauge, the Cboe Volatility Index, topped 24 – above the key 20 level that causes concern for traders – and reached its highest in a month.

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“What I feel comfortable in is taking a two, three, five-year view of the impact of AI,” Diamond said in an interview on Bloomberg TV.

“I think it will be a real positive in dampening inflation. I think it’s going to be incredibly important in terms of productivity in the global economy, and I think some people are confused right now over the valuations.”

We “are very, very positive on what AI can bring in terms of productivity, dampening inflation, global growth,” he said. There are numbers that “people really don’t understand yet, particularly around data centres.”

Waldron is expecting further market declines to be modest. “I don’t know that it will be all that more pronounced from here,” he said. BLOOMBERG