Goldman Sachs’ tactical strategist Scott Rubner isn’t buying the dip as the S&P 500 heads for a downturn. “I’m not buying the dip,” Rubner warns, suggesting a correction is imminent.
Historically, July 17 marks a pivotal moment for the S&P 500, Rubner notes, drawing on data since 1928. August follows, notoriously the worst month for outflows from passive equity and mutual funds.
With weak seasonality, stretched positioning, and all good news priced in, the index teeters on the edge of a summer correction. Goldman’s trading desk has anticipated this since early June.
“The pain trade is no longer higher from here,” Rubner wrote to clients.
The S&P 500 and Nasdaq 100 fell Wednesday on worries over US-China-Taiwan tensions, impacting global chipmakers. This comes after the S&P 500 reached 38 all-time highs in 2024, setting it up for the second-most closing highs in nearly a century, just behind 1995.
Following this winning streak, stocks are vulnerable to weak inflows and negative news. August lacks predicted inflows from passive investors or mutual funds, as capital has been allocated for Q3, Rubner says.
Trend-following systematic funds have maxed out their positions, leaving no room for further buying.
Despite some investors’ hopes for strong business earnings, a potential Fed rate cut, and rising odds of Trump winning the election, Rubner doubts these will boost stocks.
He argues these factors are already priced in, and expectations for top tech earnings are sky-high. “And by high, I mean they need to be great,” he wrote.
Rubner advises clients to consider Nasdaq 100 and S&P 500 December lookback put options, allowing the holder to exercise a derivative at the most favorable price of the underlying asset over the option’s life.
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