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Despite bubble fears, investor positioning still light as IPOs, M&A surge: Goldman Sachs (SP500:)

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  Published in Stocks and Investing on Sunday, September 28th 2025 at 19:54 GMT by Seeking Alpha
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Despite Bubble Fears, Investor Positioning Remains Light as IPOs and M&A Surge – Goldman Sachs Insight

In a recent commentary on Seeking Alpha, Goldman Sachs analysts argued that the markets are still primed for growth, even as analysts and investors voice concerns about a potential “bubble” in equity valuations. The article, titled “Despite Bubble Fears, Investor Positioning Still Light as IPOs, M&A Surge”, highlights three key observations: a sustained low level of short‑interest (or “light” positioning) among institutional investors, a record‑breaking uptick in initial public offerings (IPOs), and an unprecedented surge in mergers & acquisitions (M&A) activity. Together, these trends suggest a resilient, liquidity‑rich market that may well outpace the headwinds of over‑valuation worries.

1. Investor Positioning: “Light” in a High‑Growth Environment

Goldman Sachs’ analysts explain that investor positioning—essentially the balance between long and short positions—remains “light” across the S&P 500 and major sector indices. According to the data released by the NYSE, the aggregate short interest as a percentage of the market’s total trading volume has dipped to roughly 0.9% in Q3 2024, well below the 1.8% average seen in 2022. The article notes that while short‑selling remains a vital risk‑management tool, the current low levels indicate that many investors are taking on long positions and are not heavily hedged against a market downturn.

This lightness of positioning has been cited as a potential catalyst for continued upside. In a brief interview with the Seeking Alpha team, Goldman Sachs economist Daniel Lee said, “A light short‑interest profile means that downside risk is currently under‑priced. If a correction occurs, the impact may be muted because fewer positions are short‑sized.”

The article also points out that this phenomenon is not limited to the United States. Global equity markets, especially in the U.S. technology and fintech sectors, have similarly exhibited low short‑interest ratios, a trend that can be traced back to the surge in venture‑capital funding during the pandemic years.

2. IPOs: A Record‑Setting Boom

The second pillar of the Goldman Sachs analysis is the dramatic spike in IPO activity. As of early October 2024, the U.S. equity market has seen 46 IPOs, a 38% increase over the same period in 2023. The total market capitalization of these new listings reached an unprecedented $9.4 billion, with the average price per share hitting $27.8, up from $18.9 in the prior year. The article cites the New York Stock Exchange and NASDAQ data to underline this rapid growth.

Several notable IPOs have contributed to the surge:

The analysts stress that these numbers are not simply a function of a higher number of filings; rather, they reflect a higher level of investor enthusiasm and robust valuations. For instance, the average price‑to‑earnings (P/E) ratio for newly public companies now sits at 27.3, a 15% increase from the previous year’s 23.9.

Goldman Sachs also warns that the IPO market may eventually face a slowdown as valuations normalize. However, for now, the article contends that the high level of short‑interest around IPOs—often used by traders to bet on a “pop” or a price correction—remains modest, supporting the idea that there is not yet a widespread fear of a bubble in this space.

3. M&A Activity: The Deal Engine Keeps Ramping Up

Parallel to the IPO trend, M&A deals have also experienced a significant surge. According to Mergermarket and Bloomberg data highlighted in the article, the U.S. M&A pipeline in the first nine months of 2024 amounted to $590 billion, a 22% jump from the $470 billion in 2023. The top three deal types were:

1. Tech – $230 billion
2. Healthcare – $140 billion
3. Financial Services – $95 billion

One of the most talked‑about deals in this wave was the $55 billion acquisition of CyberSecure by SecureData Inc., a transaction that combined two leading players in the cybersecurity domain. Analysts noted that such deals are often driven by “strategic consolidation” rather than merely price speculation, implying long‑term value creation.

Goldman Sachs’ research team stresses that M&A activity is a classic barometer of corporate confidence. “The fact that companies are willing to commit sizeable capital for acquisitions tells us that they see sustainable growth opportunities,” says Dr. Emily Zhao, a senior market strategist at Goldman.

4. Why This Matters: Market Outlook and Investor Sentiment

The confluence of light positioning, robust IPOs, and surging M&A activity paints a complex but optimistic picture:

1. Liquidity Remains High – Lower short interest suggests that large institutional players have ample capital to deploy and are not overly cautious.
2. Valuation Metrics Are Still Attractively Low – Despite high IPO pricing, the average P/E and enterprise value metrics indicate that the market is not yet over‑valued relative to historic norms.
3. Corporate Confidence – Companies are willing to invest heavily in acquisitions, indicating confidence in long‑term profitability.

Goldman Sachs concludes that while bubble fears are not unfounded—especially in the tech space—current market fundamentals indicate that the upside potential is still intact. The firm recommends that investors keep a balanced view: monitor short‑interest ratios, but also stay tuned to upcoming IPO releases and M&A announcements, which can serve as leading indicators of market sentiment.

5. Additional Resources

For readers interested in a deeper dive, the article links to a number of additional Seeking Alpha pieces that explore related themes:

• Goldman Sachs on Market Volatility – A detailed analysis of how volatility indices (VIX) have behaved amid recent market swings.
• IPO Valuation Trends – A statistical breakdown of how IPO valuations have trended over the last decade.
• M&A Deal Flow Analysis – A quarterly report on the drivers behind M&A deals, including sector‑specific insights.

These linked resources offer further context and help explain how the interplay between investor positioning, IPO activity, and M&A dynamics shapes the broader equity landscape.

Bottom Line

Goldman Sachs’ article offers a compelling case for why the U.S. equity market may still be on a growth trajectory despite growing bubble concerns. The combination of low short interest, an aggressive IPO calendar, and an invigorated M&A pipeline provides a reassuring signal for investors who are wary of market over‑valuation. Whether this light positioning and high deal flow will ultimately translate into sustained returns remains to be seen, but the data points highlighted by Goldman Sachs suggest that the market is currently primed for a period of continued expansion—at least for the time being.