Institutional Insights: Goldman Sachs Tactical Flow Of Funds
According to Goldman Sachs flow desk 'Tactical Flow-of-Funds: Positive Technical Equity Dynamics
1. There is a very positive 4-week equity trading window until September
16th. This is a no rules market.
2. The pain trade for equities is higher as global two-week vacations started
on Friday at 4pm. The bar for being bearish at the beach into a Labor Day
BBQ party is high. This is new.
3. US equities have acted like a bunch of RINO’s (Recession In Name ONLY)
since the August 5th vol/carry event. $VIX has declined by 61.78% over the
last 9 trading days, the biggest 9-day volatility decline in history.
4. CTA releveraging, Target Vol / Vol Control, unwinding of puts, and
corporate demand will act as a tailwind as sellers are out of ammo forcing
fundamental investors in higher. $ flow of funds demand will have a larger
IMPACT when adjusted for August liquidity.
5. Dealer gamma will now act as a market buffer again as index desks get
longer from vol sellers and buying the dip in QIS / carry strategies (we like
this trade).
Bottom line on the direction of travel from here:
1. There is a short-term window to buy the dip as technical pressure eases.
2. Late 2H September will be a tricky trading environment (especially preelection).
3. SPX $6K - new highs in Q4, led by November and December months.
4. BONUS
"Straight Cash Homie"
Global Money Markets AUM = $8.8 Trillion
US Money Market AUM = $7.3 Trillion
Money market yields are starting to materially decline.
"Cash" on the sidelines has started to peak.
My view is that this mountain will start to get deployed elsewhere after the
US election.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!