Welcome the strongest seasonal rise of the year! Goldman Sachs capital flow expert: I ordered a "S&P 7000 points" hat

Scott Rubner, an expert in tracking fund flows at Goldman Sachs, predicted over a month ago that the S&P 500 index would far exceed 6,000 points by the end of this year. This Friday, he raised his most optimistic forecast again, stating that the S&P could reach 7,000 points, saying, "I placed an order to buy a SPX 7K hat." SPX 7K represents the S&P index rising to 7,000 points.

Although the U.S. stock market started lower on Monday, the three major indices reversed their weekly downward trend by Thursday. However, in a report released on Friday, Rubner predicted, "The U.S. stock market will rebound starting next week, and by the end of the year, the S&P 500 index will reach 6,200 points."

Rubner, who serves as the Managing Director of Goldman Sachs' Global Markets Division, wrote at the beginning of the report:

"We are entering the best seasonal period of the year for the U.S. stock market."

He continued, "I don't think many people will be shorting the S&P index while eating turkey next Thursday (Thanksgiving)."

Rubner pointed out that retail investors' enthusiasm for stocks and cryptocurrencies is accelerating, and the bullish momentum so far this year may increase the leverage of retail investors. From the perspective of fund flows, the following characteristics have recently emerged:

• Monthly fund inflows into U.S. stocks have reached a record high. Since the U.S. elections, there has been a significant inflow of funds into U.S. stocks over three weeks.

In the past three weeks, the total inflow of funds into U.S. stocks has been approximately $105 billion, with $32.752 billion flowing in the week before last, $55.781 billion last week, and $16.41 billion this week. Moreover, the fund inflow into U.S. stocks over the past three months has reached the highest level for a three-month period since 2021.

• The temporary sell-off of U.S. tech giants has suppressed the upward momentum.

The U.S. stock market has seen rotation, with giants being sold off and funds flowing into small-cap stocks. Data from Goldman Sachs' prime brokerage business shows that the net exposure of the tech giants known as the "Magnificent Seven" (Mag 7) has reached a one-year low in the total net exposure of U.S. stocks. Hedge funds are turning to other AI concept stocks and larger beneficiaries of Trump policies.

• Demand for U.S. corporate stocks continues to rise, and investors are calmly responding to supply/block trades. November is the month with the strongest corporate demand.

Currently, there are 46 registered stock issuance transactions totaling $13.6 billion. The amount for 19 unregistered issuance transactions is $3.8 billion.

Rubner's report from two weeks ago reiterated that corporations are the number one buyers in the U.S. stock market and mentioned that Goldman Sachs estimates that the value of stock buybacks executed in 2024 will be $960 billion, with the value of stock buybacks in November expected to be $100 billion.

This report reaffirms that data from Goldman Sachs' trading desk shows that November has historically been the month with the largest buyback scale since 2007, accounting for 10.40% of the annual buyback scale. It is mentioned that currently, Goldman Sachs estimates that 95% of S&P 500 constituent companies are in the buyback open window period, with the next buyback quiet period expected to start on December 23. Since the beginning of this year, the scale of funds authorized for buybacks by corporations has reached $1.105 trillion, an increase of 17% compared to the same period last year Rubner is optimistic about the future of the U.S. stock market, stating that historically, the U.S. stock market tends to enter a phase of good performance after entering a good year, and January is a time for capital deployment in U.S. stocks. From 1996 to 2022, January is typically the month with the highest inflow of funds into stock mutual funds and ETFs.

Regarding seasonal factors, Rubner mentioned that the U.S. stock market has been in a consolidation phase this week. Historical data since 1928 shows that this is a typical situation for the U.S. stock market during this period over the past century. Next week usually marks the beginning of the year-end rally, including some of the best trading days of the year, leading up to Thanksgiving.

Data since 1928 indicates that the U.S. stock market also tends to rise entering December. After Thanksgiving, many investors will return to work on the Monday of December 2nd, with 20 trading days left in the calendar year 2024. Another interesting phenomenon is that in the years of U.S. presidential elections since 1928, the stock market's rebound typically lasts until early January of the following year, tapering off before the presidential inauguration day.

Rubner pointed out that this year's performance of the S&P 500 is similar to that after the 2016 election. He expects the S&P to rise again in December, driven by sector rotation and the theme of re-inflation in the U.S. stock market.

Moreover, the upcoming Thanksgiving, Christmas, and New Year's holidays will follow one after another, and from a liquidity perspective, the threshold for shorting the stock market is very high