The S&P 500 Index has nowhere to go but down. So says Goldman Sachs tactical strategist Scott Rubner, who cautions “I am not buying the dip.” That’s because today has historically marked a turning point for returns on the equities benchmark, the Goldman global markets division managing director said, citing data going back to 1928. And what follows, of course, is August—typically the worst month for outflows from passive equity and mutual funds. Weak seasonality, stretched positioning and with all the good news already priced in, the index is on the precipice of a summer correction. It’s a view Goldman’s trading desk has been leaning into since at least early June. —David E. Rovella
Odd, this.
If only for 2 reasons:
From June 5:
The Goldman Sachs trading desk says a flood of cash from passive equity allocations will pour into the stock market in early July, setting up a continuing rally through early summer. How do they know this? “New quarter (Q3), new half year (2H), this is when a wall of money comes into the equity market quickly,” Goldman’s Scott Rubner wrote in a note to clients. In addition, the bank predicted that share prices should benefit from strong seasonal trends and rising engagement from retail investors.
On May 9 SPY, the S&P 500 ETF traded 518.10. It is 40 points higher today after yesterday’s down day.
Last week, there was this too:
The bigger they come, the harder they fall—and perhaps sooner rather than later. The stock market these days is looking pretty big, so it should come as no surprise that yet another wise voice has been lent to the choir singing the notes of correction. Morgan Stanley’s Mike Wilson is warning that traders should brace for a significant pullback in the stock market as uncertainty swirls around the US presidential campaign, corporate earnings and Federal Reserve policy. “I think the chance of a 10% correction is highly likely sometime between now and the election,” Wilson said in an interview with Bloomberg Television Monday. The third quarter is “going to be choppy.” —David E. Rovella
The reason for the choppiness? Volatility. Mathematical volatility inspired by the velocity at which assets are changing value (up or down). Not bonus seekers in the news.