No matter who becomes president, will they sell? Goldman Sachs trading department: Regardless of the outcome, CTAs will sell stocks this week

Goldman Sachs' trading department recently reported that regardless of the final outcome or market trends, Commodity Trading Advisors (CTAs) will sell off stocks in the U.S. and globally.

In a report released on Monday, November 4, Eastern Time, Goldman Sachs' trading department stated, "Our model assumes that this week, CTAs will become substantial sellers in any market scenario."

According to Goldman Sachs' predictions, in a scenario where the U.S. stock market remains flat, the E-mini S&P 500 index is expected to see an outflow of $4 billion. If the market rises by 2 standard deviations, the outflow is reduced to $942 million, while if the market falls by 2 standard deviations, the outflow increases to $11.2 billion. Global stock markets are also expected to face sell-offs in any anticipated scenario.

It is worth mentioning that last week, CTAs already sold off $8 billion worth of global stocks. The above predictions imply that the selling by CTAs will not cease after the results of the U.S. presidential election are announced this week.

On the same Monday, JP Morgan strategist Dubravko Lakos-Bujas predicted in a report that once the results of the U.S. presidential election are announced, the U.S. stock market will rise in the final stages of 2024, particularly in cases where the election results lead to a political deadlock. His report stated:

"In any deadlock scenario, we believe that as uncertainty diminishes, volatility decreases, and hedges are unwound, the stock market will reprice, and investors will refocus on the Federal Reserve as the economy and corporate earnings remain resilient."

Morgan Stanley's chief U.S. equity strategist Mike Wilson also predicted that as the U.S. presidential election concludes and the fear of missing out (FOMO) begins to take effect at the end of the year, the S&P 500 index may continue to rise in the final stages of 2024, potentially reaching as high as 6,100 points. A level of 6,100 points would mean that the S&P 500 index would rise nearly 6.5% from last Friday's closing level.

However, Wilson also pointed out that this year, the index will not break through 6,100 points "under any circumstances" due to high valuations, and the price-to-earnings ratio is unlikely to expand further as we enter 2025. Additionally, without clear catalysts, the enthusiasm for this stock market rally may fade as 2025 approaches.

The Morgan Stanley team led by Wilson believes that if Trump wins the election and the Republicans achieve a blue sweep in both houses of Congress, the U.S. 10-year Treasury yield is expected to experience limited fluctuations due to improved economic growth expectations, which would be a positive signal for the stock market. In this scenario, cyclical stocks such as financials and industrials are expected to perform well.

At the same time, Morgan Stanley warns that if U.S. Treasury yields rise "significantly" due to market concerns about fiscal prospects, risk aversion in the stock market will increase, negatively impacting consumer stocks sensitive to tariffs.

If Harris is elected president and Congress becomes divided, meaning the Democrats fail to secure a majority in both the House and Senate but only become the majority party in one, consumer stocks and renewable energy stocks affected by tariffs may outperform the market in the short term. In this case, declining interest rates may also benefit housing-sensitive consumer stocks, while financial stocks, industrial stocks, and sectors sensitive to commodities may perform poorlyLast week, Citigroup's report suggested that despite the market's expectations of Trump's election already being partially reflected in stock prices, U.S. stocks are still expected to perform well before the end of the year. This optimistic outlook is based on two main arguments: first, the implementation of any tariff policy will take time, making it unlikely to have an immediate negative impact on the market; second, even in the case of a Harris victory, as long as the Senate is not simultaneously controlled, the impact on the stock market will be limited, as maintaining the status quo is positive for the U.S. stock market.

Although the market is concerned that rising interest rates may put pressure on stocks, Citigroup's analysis shows that a sharp rise in interest rates does not necessarily harm the stock market. In a stress scenario, even if the yield on U.S. 10-year Treasury bonds rises by 30-40 basis points, historical data indicates that such fluctuations do not significantly impact the stock market, and in some cases, stock market returns may even be positive.

Citigroup discovered through VRP signals that the market may be tactically oversold, indicating that it may have overreacted to the uncertainty of the election. They believe that despite the uncertainty in the market before the election, there are signs of "excessive fear," and the market may rebound positively if the election results are favorable. Additionally, seasonal factors also support a market rebound before the end of the year, leading Citigroup to maintain an overweight position on U.S. stocks