The pension investment portfolio is being rebalanced, which means there will be stock sales. Most S&P 500 companies have recently entered a period of banning stock buybacks. The liquidity this summer may decrease, and the market environment after this week will become more difficult.
Goldman Sachs' derivatives trader and fund flow strategist Scott Rubner has issued a warning about the future situation of the US stock market.
Rubner's recent report pointed out that the current market sentiment is no longer bearish, but greedy. Investors are no longer shorting, and retail investors are returning to the stock market. As we enter the summer of this year, liquidity is currently strong, and pension funds are rebalancing their portfolios. As US-listed companies enter the period of stock buyback prohibition, the situation of capital flow has changed. Liquidity may decrease in the summer, and the market environment after this week will become more difficult. Investors who are prevented from entering the market are already blocked at this time.
The report shows the following charts, showing that Goldman Sachs' stock sentiment index is currently at its highest level since April 9, 2021, reflecting investors' concentration of positions. The index tracks the holdings of institutions, retail investors, and investors outside the United States, accounting for 80% of the US stock market.
The following figure shows that retail investors are returning in large numbers. The activity of small-cap stocks held by retail investors has rebounded significantly, exceeding 99% of the level in the past five years.
The trading activity of small-cap stocks is higher than 93% of the period in the past five years.
Rubner reminded that on September 13 last year, the short position of US stock futures reached 510 billion US dollars, while the long position is currently only 20 billion US dollars.
As we enter the end of the second quarter, the investment portfolio of pension funds is being adjusted and is in the process of rebalancing. Large-scale stock rebalancing means stock selling. Goldman Sachs' model estimates that $33 billion of US stocks will be sold by pension funds at the end of the month and the end of the quarter. This is the largest rebalancing since June last year, almost twice the average level of the past three years, which is 83% of the period.
The sale of global bonds has hardly increased, but if bonds rise, commodity trading advisors (CTAs) will buy bonds in large quantities, and the expected purchase scale will have a large upward deviation.
Looking at the period during which companies are prohibited from buying back their own shares, Goldman Sachs estimates that the window for such buybacks will end on July 28th. Currently, 60% of the S&P 500's constituent stocks are prohibited from buybacks, and it is expected that this proportion will increase to 85% by the end of next week.
