Hundreds of billions of funds are eager to move! Goldman Sachs: US stocks can hit new highs this week
Scott Rubner of Goldman Sachs Group expects the S&P 500 index to hit a historical high this week, mainly due to strong inflows from company buybacks and systematic funds. He pointed out that $17 billion will flow in daily this week, and this trend will continue in the weeks leading up to September 16th, the stock buyback window. However, Rubner warned that this demand may disappear in three weeks, leading to a possible market downturn. The market's major test will come after NVIDIA announces its earnings on Wednesday
Goldman Sachs global market director and strategy expert Scott Rubner said that strong funds from company buybacks and systematic funds will drive the S&P 500 index to hit a new all-time high this week, further intensifying investors' FOMO sentiment, also known as "fear of missing out."
In a report to clients on Monday, Rubner wrote, "We estimate that there will be $17 billion per day of 'non-emotional demand' from robots and corporations this week. There have been three very active stock buyback windows before September 16."
The S&P 500 index fell 0.3% on Monday, less than 1% away from the historical closing high set on July 16.
Rubner reiterated the view of Goldman Sachs' trading department that Fed Chairman Powell's speech last Friday reflected the Fed's dovish stance on interest rates, giving the green light for re-leveraging, thus "the stock market will rise before mid-September."
Goldman Sachs simulates that Commodity Trading Advisors (CTAs) will conduct a so-called "green sweep" in the coming week, meaning these funds may buy stocks regardless of market developments. In addition, Goldman's stock buyback department saw the largest demand this year last week, more than twice the demand for the same period in 2023, Rubner expects strong buying pressure before the quarterly lock-up period on September 13. Last week, passive investors poured $20 billion into global stocks.
"Everyone is back here," he wrote. "Now the market is too exposed to downside risks."
However, Rubner warned that this demand may disappear in three weeks, meaning the stock market may return to a downward trend.
The next major test for the market will come after the U.S. stock market closes on Wednesday, when NVIDIA (NVDA) will report second-quarter earnings and revenue, expected to double from the same period last year. According to Rubner's calculations, the options market implies that the chip giant's performance will cause a market fluctuation of about 9.35%, or around $298 billion.
"Given the sell-off in the tech sector, NVIDIA's profit expectations for this quarter are much lower than in recent quarters," Rubner wrote, referring to hedge funds reducing their positions in the tech sector. "What will happen if NVIDIA's earnings report on Wednesday exceeds expectations?"
