Goldman Sachs Managing Director Scott Rubner stated that the anticipated brief pullback by investors may not materialize, with expectations of the stock market continuing to rise until the end of the year, in line with seasonal trends. Historical data shows that November and December are typically the strongest months for stock market performance. The election could serve as a catalyst for risk assets, driving market gains. Corporate buybacks and investor seasonal adjustments will also impact the market, with expectations of lucrative returns in the final two months
According to the financial news app Zhitong Finance, the upcoming US presidential election has triggered concerns on Wall Street, one of which is the persistently high VIX fear index. However, Scott Rubner, Managing Director at Goldman Sachs, believes that the anticipated or expected brief pullback by many investors may not materialize.
Rubner predicts that the stock market will continue to rise until the end of the year, in line with seasonal trends. Historical data shows that November and December are typically the strongest months for stock market returns. Rubner points out that the election, scheduled for November 5th, may serve as a catalyst for a risk asset "liquidation event," sparking investors' "fear of missing out" (FOMO) and driving up the market. Additionally, he believes that sectors and themes currently overlooked by the market may see the biggest gains as they are currently underinvested.
Rubner also notes that corporate buybacks and investors' seasonal portfolio adjustments in the next two months may have a greater impact on the market. He mentions that target-date funds, retail investors, and private wealth management firms typically rebalance their portfolios in January, April, and November. Investors holding maturing government bonds may choose to reinvest funds into the stock market.
If the stock market performs as historically observed, the last two months of this year could bring substantial returns. Since 1928, the median return of the S&P 500 index from October 27th to December 31st has been 5.2%. In election years, this return increases to 6.3%.
With the reopening of the corporate buyback window, corporate repurchases may also help drive the stock market higher. According to data from Goldman Sachs' trading desk, November is typically the most active month for corporate buyback transactions, historically seeing inflows of over $100 billion solely from buybacks.
Mutual funds and pension funds may also reduce some selling as their fiscal year ends at the end of October. Rubner also observes an increase in trading activity by retail investors in popular stocks such as NVIDIA (NVDA.US) and Tesla (TSLA.US). If this trend continues, it could increase the number of buyers.
After answering numerous client questions over the weekend, Rubner noticed a common theme: investors have shifted from asking about hedging against selling to how to better capitalize on the market's upward momentum before the year-end. Rubner has remained bullish on the stock market. Earlier this month, he expressed concerns about whether his year-end target of 6000 points for the S&P 500 was high enough. Currently, the S&P 500 only needs to rise by another 3% to reach that target