Goldman Sachs' global market director and strategy expert Scott Rubner released a report on Monday stating that the US stock market will experience two painful weeks from early August as large amounts of funds flow out of the stock market. Rubner said, "Painful trades have turned downwards. The best trading days of the year have passed, buyers are already fully loaded, and ammunition is running out."
Due to market bets that the Fed will cut interest rates about twice this year, the S&P 500 index hit its 35th highest level since early January, according to Bloomberg News. Analysts also predict that US corporate second-quarter earnings are expected to increase by about 9%, the highest level since the first quarter of 2022.
Rubner believes that the threshold for corporate performance is high because these high expectations have already been formed, which means that the financial reporting season "is no longer a bull market period." Most importantly, the position of systematic funds has reached such a high level that any volatility surge or lower-than-expected returns, especially from "massively held market-cap-weighted stocks", may force non-fundamental sellers to lower their risk.
Historically, August is the worst month for passive investors and mutual fund stock inflows. Rubner wrote that there is no expected inflow in August, as investors have deployed funds for the third quarter after recording the second-largest stock inflow ever in the first half of 2024.
His analysis of data since 1928 shows that the S&P 500 index reached a "partial peak" in mid-July, and then entered the fifth worst two weeks of the year in early August.
"We are ending the best trading period of the year." Rubner also said that for the time being, this is his last bullish view of the US stock market.
It is worth noting that there are more voices recently singing empty of US stocks.
Morgan Stanley strategist Mike Wilson said that as uncertainty around the US presidential election, corporate earnings and Federal Reserve policy intensifies, traders should be prepared for a pullback in the US stock market. "I think it is very likely that there will be a 10% callback from now until some time during the US election period."
David Kelly, chief global strategist at JPMorgan Asset Management, believes that despite the latest non-farm payrolls showing a gradual slowdown in US economic growth and the Fed expected to cut interest rates twice in 2024, he is not optimistic about US stocks because of the risks of a sharp pullback in US stocks.
Legendary Wall Street investor John Hussman recently stated that by some measures, the S&P 500 index seems to be the most severely overvalued since before the 1929 stock market crash. Hussman even said that a 70% drop in US stocks is not surprising by any means.
Edited by Jeffrey