The combination of corporate buybacks and systematic flows has created a favorable environment for the S&P 500 to reach new highs in the near term.
However, Rubner warns that demand could dry up within three weeks, which could tip the market into a new correction phase.
Reuters
The confluence of strong flows from corporate buybacks and systematic funds could lead to the S&P 500 index to hit a new all-time high this week, increasing pressure on investors who fear being left out, according to Scott Rubner, managing director of global markets and tactical specialist at Goldman Sachs Group Inc.
Rubner highlighted that daily demand from robots and corporations is estimated at around US$17 billion, which would mark a crucial week for the stock market.We are in a very favorable equity trading window that extends until September 16“he said in a note to clients and quoted by Bloomberg.
Although the S&P 500 experienced a modest 0.3% drop on Monday, the index remains less than 1% from its all-time closing high reached on July 16. The optimistic outlook is reinforced by the Federal Reserve’s recent shift in policy toward a more expansionary stance, a decision that Rubner sees as a signal to increase leverage in equity trading until mid-September.
Other estimates for the S&P 500
In line with this strategy, Goldman Sachs is adjusting its models for commodity trading advisors, anticipating that funds will continue to buy stocks regardless of market performance in the coming week. In addition, Goldman Sachs’ corporate buyback desk reported last week its highest demand of the year, doubling the figure for the same period in 2023. Rubner expects this strong buying to continue until the close of the quarterly blackout window on September 13, accompanied by significant inflows into global equities by passive investors.
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However, Rubner warns that demand could dry up within three weeks, which could tip the market into a new correction phase.
The next big challenge for the market will come on Wednesday, when Nvidia Corp.. reports its second-quarter results, which are expected to be more than double the previous year’s figure. According to Rubner, the options market suggests volatility of 9.35%, which could generate a market swing of up to $298 billion based on the chip giant’s results.
“The bar for Nvidia this earnings season is lower than in previous quarters due to the recent sell-off in the technology sector,” Rubner noted, raising the possibility that Nvidia will beat expectations on Wednesday.
Source: Ambito
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