Goldman says 'TINA trade' is alive and well, fueled by 401(k) buying
The stock market could get another boost on the strength of the "TINA" trade, according to Goldman Sachs. TINA, which stands for "There Is No Alternative," refers to an idea that takes hold when investors believe there is no viable investment to put their money into outside of one specific asset, usually equities. The bull market following the 2008 financial crisis, when low interest rates made bonds a less attractive option, was one such period when the trade gained steam on Wall Street. Now, David Kostin, chief U.S. equity strategist at Goldman Sachs, said he expects that flows into the stock market from retirement accounts will continue to power the current rally. He wrote that the average allocation to stocks from 401(k) plans has risen, up to 71% in 2022 from 66% in 2013, with a big spike among participants in their 20s, to 90% from 76%. "Retirement accounts will continue to support household demand for equities," Kostin wrote in a Friday note titled: "TINA trade remains alive and well in US retirement accounts." "We estimate contributions to 401(k) plans drive roughly $500 billion of annual equity demand, though some of this demand could be allocated to international equities," Kostin added. The growing importance of 401(k) assets to stock market could help tip it back into record territory. The S & P 500 was last just a little more than 2% off its February peak as stocks looked past trade uncertainty, as well as a recent spike in geopolitical risks abroad in Israel and Iran, to mount an impressive comeback. There are a number of reasons to be confident stocks could go higher. Kostin said investor sentiment remains depressed, with the firm's own internal indicator remaining in negative territory, in spite of the recent rally. And, demand for equities from households, which the strategist said directly own 38% of the U.S. equity market, remains resilient. That could mean households can continue to support the stock market later this year, so long as the macroeconomic picture continues to hold. "Outflows from equities occur after household balance sheets weaken, unemployment rises, or short-term interest rates increase. Currently, the US labor market remains solid, household balance sheets are healthy, and the Fed is on hold," Kostin said. He added: "As a result, we continue to expect that US households will buy $425 billion of equities this year."
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