Scott Rubner, a tactical strategist at Goldman Sachs Group, said that the S&P 500 Index has nowhere to go from now on and will only fall. He warned that “I will not buy the dip.”
That’s because Wednesday, July 17, historically marks a turning point in equity benchmark returns, said Goldman Sachs, a managing director in Global Markets, citing data dating back to 1928. The worst month has been this month for outflows from passive stocks and mutual funds.
Seasonal weakness, tight positioning, and all the good news priced in, the index is on the verge of a summer correction. Goldman’s trading desk has been leaning toward this view since at least early June. “From now on, there are no higher pain trades,” Rubner wrote in a note to clients on Wednesday.
The S&P and the tech-heavy Nasdaq 100 plunged on Wednesday on concerns that U.S. politicians would take a tougher stance on China and Taiwan, which would impact global chipmakers.
The S&P 500’s 38 all-time highs in 2024 put the stock on track for its second-highest closing high in about 100 years, Rubner wrote, adding that only 1995 would be a strong move.
After consecutive gains, stocks face risks of weak inflows and remain vulnerable to negative news. Rubner said he doesn’t expect inflows from passive investors or mutual funds in August because third-quarter capital has already been deployed. As for trend system funds, the position has reached its maximum length, indicating that there is no room for further buying.
While some investors believe strong earnings, the possibility of a near-term interest rate cut by the Federal Reserve and the increased likelihood that Donald Trump will win the U.S. presidential election will provide another boost to stocks, Rubner said they will not be positive. catalyst.
Such events have already been priced into the market, and the bar for profit on the largest technology stocks, which has driven the market to record highs, is very high. “By high, I mean they need to be great,” he wrote.
Rubner advises clients to buy Nasdaq 100 and S&P 500 December lookback put options, which allow the holder to exercise the derivative at the most favorable price for the underlying asset during the life of the option.
