Institutional Insights: Goldman Sachs Flow Of Funds Update

GS Tactical Flow-of-Funds: Year-End Melt Up S&P 500 has hit 46 new all-time highs in 2024 and is up +42.32% from the October 27, 2023 low which is one of the best 12-month rallies in history.

There are 54 trading days left in 2024. I did not have “Spooky 6k” by Halloween24 on my Bingo Card. I think that the S&P 500 is well north of 6K by the end of the year. The equity market sell-off is canceled, and a year-end rally is starting to resonate with clients shifting from hedging from the left-tail to the right-tail. Institutional investors are getting forced into the market right now given “FOMU”: fear of materially underperforming benchmark equity indices is high. The desk is fielding questions on best implementations given a potential rally in the “Trump Trade”; this is new and broadened out the equity rally. Cyclicals also tend to outperform defensives in Q4. Next week is the Superbowl of quarterly earnings where 37% of the S&P 500 reports earnings. Investors are looking for out of favor ideas. Things that if you drop on your foot, it hurts (ouch).

What is the seasonal median return for US equities between now and the end of the year? a. The median S&P 500 return from October 15th to December 31st is +5.17% since 1928. If we apply today’s current S&P 500 level ($5860), this implies a year-end level of $6160. b. The median S&P 500 return from October 15th to December 31st in election years is +7.04% since 1928. If we apply today’s current S&P 500 level ($5860), this implies a year-end level of $6270. c. The median NDX return from October 15th to December 31st is +12.08% since 1985. If we apply today’s current NDX level (20,439), this implies a year end level of $22,900. d. The median NDX return from October 15th to December 31st in election years is +7.29% since 1985. NDX is lower in election years when compared to non-election years. e. The median RTY return from October 15th to December 31st is +7.92% since 1979. If we apply today’s current RTY level ($2248), this implies a year-end level of $2425. f. The median RTY return from October 15th to December 31st is +10.08% in election years since 1979. RTY is higher in election years when compared to non-election years. This is the stat that will gain some attention.