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Institutional Insights: Goldman Sachs Flow of Funds (FOMO)
GS.Tactical.Flow of Funds November FOMO Watch
I had the largest number of incoming questions this weekend in 2024. This is the final stretch, and everyone is locked in with 44 days left to trade in 2024. These are the 10 most important points that I am tracking right now.
a. Today starts the best trading period of Q4 for US equities with data going back to 1928. October 28th is one of the best trading days of the year and a positive seasonal trading stretch with 9 straight days of gains. The 47th all-time high was set on 10/18: 5864 or ~ 20 points higher than todays premarket open.
b. Today begins the best trading period of the year for US equities also during election years.
c. Month-end will reduce supply from the largest sellers of the equity market: (mutual fund year-end and pension supply) and bring back online the largest buyer of the equity market, US Corporates. US Corporate repurchase window starts today with 50% of corporates in the open window.
d. Incoming client questions have shifted from hedging the left tail to the right tail. The VIX is down -1.13 points to 19.20, and there is room to add length if volatility drops further.
e. The global consensus on Wall Street is that we will dip after the election, and investors are waiting for the (-5%) dip to add. I do not think that we see this left tail.
f. I think that the US election will be a clearing event for risk assets, and re-risking may happen quickly (and out of favor sectors and themes that are under-owned).
Target-date funds (TDFs), PWM allocations, and retail investors typically rebalance their portfolios in January, April, and November. Investors who have Treasury Bills rolling off may be looking for a new home. US fund flows since 2019: Cash $3.465 Trillion, Bonds $2.029 Trillion, and Equities $55 Billion
Seasonals - everyone loves a Year-End rally... (7 trading days to the US election). a. The median S&P 500 return from October 27th to December 31st is +5.22% since 1928. b. The median S&P 500 return from October 27th to December 31st in election years is +6.25% since 1928. c. The median NDX return from October 27th to December 31st is +11.74% since 1985. d. The median NDX return from October 27th to December 31st in election years is +7.17% since 1985.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!