Rubner, an expert who accurately predicted the US stock market correction in late summer this year, said that historical data shows that the second half of September is the worst performing two weeks for the s&p 500. On Tuesday of this week, market participants have already traded on the bearish view of September, without waiting for the technicals to turn negative.
The curse of the September dip seems unstoppable, as Scott Rubner, the capital trend expert in Goldman Sachs research, accurately predicted the pullback in US stocks at the end of this summer.
In a report released on Wednesday, September 4th, Rubner, the Managing Director of the Global Market Department at Goldman Sachs, explicitly stated: 'I am bearish on US stocks from September 16th.' The report stated that on the first trading day of September, Rubner observed that market participants began to trade in anticipation of a bearish market.
'We have seen that clients act faster before the market's technical outlook turns negative, rather than waiting until mid-month. If the (US non-farm) employment data this Friday is weak, a market adjustment may begin. In the past 48 hours, I have received more inquiries about technical market updates than I have received all year.'
Rubner said that he has been tracking capital trends for over 20 years, and after the market turmoil on 'Black Monday' on August 5th this year, the change in trading style has become faster. The most frequently asked question by investors is: why has September historically been a weak month for global stocks and risky assets?
Rubner's report found that the second half of September is the worst-performing period for the S&P 500 index in a year. The report pointed out that since 1928, in the last 11 trading days of September, the median daily return of the S&P 500 has been negative for ten days. Capital flow can explain why September has been a weak month throughout the year.
Performance of the S&P in September over the years since 1925, as calculated by Fisher Investments
The report shows that in the past four years, from 2020 to 2023, the S&P has dropped by nearly 4% in September, with declines of 4.87%, 9.34%, 4.76%, and 3.92% respectively. The NASDAQ 100 index also dropped by at least 5% in each of these years, with declines of 5.07%, 10.6%, 5.73%, and 5.72%. Rubner believes that this past performance may serve as a reminder for investors to take precautions during the back-to-school season in September.
The report pointed out that in September, the systematic holding period of US stocks has completely returned to normal, and companies are entering a buyback blackout period. The retirement funds have ample supply at the end of the quarter, and mutual funds have made some important adjustments in the final year of this fiscal year. The September risk/value at risk (VAR) of US stocks exceeded that of the past six US electoral cycles. In addition, after Labor Day in the United States, a paper feast began - on Tuesday, the supply of US stocks reached $3.2 billion, and the supply of high-grade bonds reached $43 billion, the third largest single-day scale in history. Goldman Sachs' trading department remains active.
Regarding buybacks, the report mentioned that August and September are the two strongest months for buybacks in a year. Since the beginning of this year, the authorized scale of corporate buybacks has reached a record $893 billion. Listed companies have become the largest buyers in the US stock market. Goldman Sachs estimates that the recent blackout period for buybacks began on September 13, and half of the companies will no longer be able to engage in buybacks. Goldman Sachs predicts that during the blackout period, demand for buybacks will decrease by 35%, and this week will be the peak of buybacks for companies in the buyback window.
As for retirement funds, the report mentioned that before September, the capital trend of US stocks had exceeded the previous five electoral cycles. The Milliman 100 Retirement Fund Index shows that the solvency of retirement funds has reached 103%. Rubner said that retirement funds have been shifting towards investment-grade corporate bonds, reducing equity risk, and using immunization strategies to reduce debt risk. Given the abundant capital, retirement funds have been reducing equity risk before the US election.
Regarding mutual funds, the report states that as of October, Goldman Sachs' research found that the 554 large mutual funds with a total of $3.7 trillion in stock assets, October is the last month of the current fiscal year for most mutual funds, and the funds in October account for nearly 22% of the total assets under active management, followed by December, accounting for about 20% of the total assets under management. October, as the end of the fiscal year, may have a negative impact on the price trend of popular mutual funds, or may have already had a negative impact, because funds that have performed poorly since the beginning of the year may sell off due to tax losses, and funds that have performed well since the beginning of the year may reduce their holdings or take profit.
In conclusion, Rubner's basic point of view is that the weakness of US stocks in September has been traded by traders in advance, and the US presidential election in November has become a liquidation event for risk assets.