CANARIES IN THE MINE?
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Goldman Sachs chief executive David Solomon said he sees “more greed than there is fear” in financial markets as investors shrug off concerns around elevated asset prices, the high cost of oil and rising US inflation to drive stock prices higher.
The comments from the investment banking boss underscore the bullish view on Wall Street that helped push the S&P 500 to record closing highs 11 times last month, half of all trading days.
Solomon, speaking at the Economic Club of New York, was asked about the market’s ability to absorb upcoming mega initial public offerings for tech companies including SpaceX, OpenAI and Anthropic. The listings, on which Goldman hopes to play major roles, will be the largest IPOs of all time. Solomon said there was “plenty of liquidity in the system if the world continues to remain as optimistic”.
“I know when I say it, it will get quoted. But I think it’s definitely true and something for us to reflect on. We are definitely at a moment where there’s more greed than there is fear,” Solomon said. “That’s one of the reasons why people that need this capital are coming to the markets. Because the capital’s available.”
Solomon pointed to the relatively muted market reaction to Alphabet’s announcement of an $80bn equity raise — the stock was down roughly 2 per cent on Tuesday — as a sign of the market’s appetite to fund major growth projects. Goldman Sachs served as a placement agent and joint bookrunner on the deal.
“This is the largest equity deal, largest follow-on equity deal that’s ever been done. The stock’s trading quite well,” Solomon said. “This is the first actual concrete data point for bringing something of this scale and it’s encouraging.”
While broadly upbeat on AI and the economy — he said a decade in the future with advances in AI the US would have “a very, very productive economy” with low unemployment — Solomon cautioned that the mood in markets “can turn into fear very quickly”.
US stocks linked to the AI investment boom have posted massive gains in recent months, with the blue-chip S&P 500 last week closing out its longest weekly winning streak since December 2023.
The tech-heavy Nasdaq Composite has surged 30 per cent since the end of March, driven by semiconductor groups and memory companies in particular. Software stocks have at the same time rebounded from a sell-off at the start of the year.
Driven by record earnings, memory-maker Sandisk has led the pack, up some 630 per cent this year. Semiconductor manufacturer Micron, server maker Dell and chipmaker Intel have climbed 265 per cent, 250 per cent and 191 per cent respectively over the same period.
“The S&P 500’s 5 per cent first-quarter pullback seems like a distant memory,” Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management, said in a note this week.
“When they go low, we go high,” is a Democratic mantra. But it only works if people think liberals have the credibility to trumpet high morals. Not enough of America does. To Gen Z voters, such virtue signalling comes straight from the self-serving “boomer” playbook. The young are no likelier to respect Democratic ethics appeals than they are to take up bridge. Coming to grips with America’s volatile politics is futile without engaging with the deep scepticism of its young.
Among the best-known younger Democrats, two — Zohran Mamdani, New York’s mayor, and New York congresswoman Alexandria Ocasio-Cortez — call themselves socialists. A third, James Talarico, a Democratic Senate nominee, describes himself as a Christian progressive. But he is running in Texas, so is treated as a socialist regardless.
More than a third of Americans under 30 have a favourable view of “communism”, according to a Cato poll last year. Almost two-thirds look kindly on socialism. It is easy to dismiss this as standard youthful misguidedness. Gen Z is variously written off as work-shy, entitled, unambitious and ignorant. But there is nothing in their politics that is nearly as drug-inspired as the late 1960s radicalism of their grandparents. It is not hippie to wish for affordable housing or to fear AI’s impact on your earnings potential. Nor is it Stalinist to want universal health insurance.
That explains why the 41-year-old likely Senate candidate in Maine, Graham Platner, is staving off scandals that would have finished off candidates in earlier cycles. He once had a skull-and-bones tattoo of a symbol used by Hitler’s Waffen-SS and has been caught sending extramarital sexts. Yet his poll lead is sufficiently large to have forced Maine’s competent and scandal-free governor, Janet Mills, to drop out of the race. Mills is 78. And she, unlike Platner, had no plans for single-payer healthcare or, until she flip-flopped, to tax America’s ultra-wealthy. Platner’s seeming immunity from scandal shows that Bernie Sanders-style left populism is still potent.
The Democratic split over Platner betrays a much deeper philosophical divide. Campaign professionals and mostly older elected Democrats are terrified of squandering their moral capital against Donald Trump because of Platner’s nomination. They also fear that a Platner contest against Susan Collins, the state’s veteran moderate Republican, could imperil the party’s chances of winning the Senate in November.
But Platner is appealing to precisely those groups that Democrats most urgently need to win back, especially the young and working class. Those who have done it, such as Mamdani, tend to get written off as irrelevant to middle America. Mamdani’s socialist campaign to run the city that is still the headquarters of global capitalism was powered by the young and the blue collar. Some say he won in spite of his hostility to Israel. It was likelier to have helped. Reflexive loyalty to Israel is seen as another establishment trait.
That same chasm is also visible on the right. Younger Maga Republicans — beyond so-called podcast populists like Tucker Carlson and Candace Owens — are routinely hostile to Israel. Older Republicans tend to be Israel right or wrong. The same root that feeds flirtation with communism on the left is also fuelling antisemitism on the right. It is no use telling a generation that their views are un-American. The most striking often-polled finding about Gen Z is their lack of flag-waving patriotism. More than any previous generation at that or any age, Gen Z rejects the idea of America as morally special.
Such alienation is angrier than the “peace and love” of the flower power generation. Luigi Mangione, the man accused of murdering a healthcare executive in New York in late 2024, is still a vigilante folk hero to many young Americans on the left and right — and not just because of his looks. Members of Gen Z are far more likely to approve of violence to settle political disputes than their elders. They are also far less trusting of democracy.
The more thoughtful Democrats are aware that simply opposing Trump is not enough to win the loyalty of younger Americans. Trump’s well-earned unpopularity may well be enough for them to regain the House of Representatives, and maybe the Senate, in November. But that will be insufficient in 2028. The party has an ingrained habit of postponing serious thought until after the next election, which, like tomorrow, never comes.
Democrats will not get many more chances to show they can make the system deliver for the majority. Overlooking the sometimes troubling but largely rational complaints of America’s Gen Z would assure their failure.
Cliffwater’s flagship private credit fund aimed at retail clients limited withdrawals after redemption requests hit 17 per cent in the second quarter, underscoring the mounting exodus from the sector.
Cliffwater said it had restricted withdrawals from its $31bn marquee corporate lending fund in the second quarter to 5 per cent of its outstanding shares, or about $1.6bn, according to a letter seen by the FT.
The withdrawal requests, worth more than $5bn, swelled from the first quarter when investors sought to redeem 14 per cent of the fund.
The firm sits at the centre of a storm engulfing the private credit industry, which has been hit by a deluge of redemption requests over the past nine months amid worries over the quality of funds’ loan portfolios. The situation has worsened in recent months as investors fret that AI will disrupt software companies that the industry has heavily financed.
Cliffwater had been one of the fastest-growing investment managers at the height of the private credit fervour in 2023 to 2024, as wealth advisers pitched its funds to everyday investors. The firm competes with private capital giants such as Blackstone, hoovering in cash to its funds and ranking among the most popular choices for wealth managers placing client funds.
But unlike the funds pitched to sophisticated institutional investors that lock up capital for years, these newer funds — including several vehicles offered by Cliffwater and rivals such as Blue Owl — provided investors the ability to redeem at least a portion of their investments every quarter.
As investor appetite has soured, that has meant a wave of withdrawals has buffeted funds managed by groups from Apollo and Ares to BlackRock and Blackstone.
The vast majority of investment firms have moved to gate their funds, limiting how much cash they have to return to shareholders in any quarter. That has helped prevent fire sales of assets that would have inflicted painful losses on remaining investors in the funds.
Cliffwater chief executive Stephen Nesbitt said in the letter: “Our repurchase programme is intentionally designed to provide shareholders with periodic liquidity that aligns with the fund’s long-term investment strategy and its underlying assets.”
Cliffwater’s fund differs from many of its peers in that it owns private loans to companies as well as stakes in other funds that invest in untraded debt.
The firm noted in its letter that it owned more than 4,000 loans, limiting its concentration to any one investment or manager. The corporate lending fund has returned 8.05 per cent over the past year, including 1.7 per cent this year.
“Shareholder demand and fund performance continue to reflect the advantages of our differentiated multi-manager approach and the broad, diversified access it provides to private credit,” Nesbitt said.
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