Bull market boosts confidence! Goldman Sachs envisions the S&P 500 reaching 6000 points by the end of the year, but anticipate a rebound after short-term fluctuations.

Goldman Sachs Global Markets division director general manager Scott Rubner said that the US stock market is expected to rebound before the end of the year, but will only rebound after experiencing unfavorable short-term conditions such as technical positioning, fund flows, and pre-election anxiety. Scott Rubner stated in a client report last Friday: "From a tactical standpoint, I am negative about the end of the quarter, but the target is for the S&P 500 index to rebound before the end of the year." Goldman Sachs data shows that in the past two trading days ending on September 20, long positions decreased by approximately $6.1 billion, the third largest reduction since 2019. This means that Wall Street traders are not buying on dips to maintain neutral positions. Scott Rubner also expects selling pressure to increase in the next month or so. He stated that October is usually when actively managed mutual funds sell their worst-performing positions and prepare for the end of the year. Meanwhile, well-funded pension funds are reducing their stock exposure and turning towards investment-grade credit. Scott Rubner mentioned that as the US election approaches, institutional investors are selling favored long positions, buying S&P 500 put options spreads to hedge potential losses. He predicts that more selling will come from hedge funds, which still have high risk exposure in the election but typically reduce their positions before voting. Additionally, trend-following systematic funds are only bullish in the next five trading days, with commodity trading advisors (CTAs) expected to sell $47 billion worth of US stocks next month if market sentiment turns negative. Therefore, Scott Rubner noted that the recent trend will be volatile trading, declining stock prices, and increased volatility. He believes that after the election, things will change, and regardless of the winner, the S&P 500 index will experience an end-of-year rebound fueled by "fear of missing out (FOMO)," with the index rising to 6000 points by the end of the year. He stated that investors may chase risk assets in November and December, reallocating cash from their portfolios into stocks. Scott Rubner mentioned that since 1900, the median return for the S&P 500 index in November and December of election years has been 3.4%. He also expects that once the dust settles on the election results, market breadth will improve, with inflation-linked stocks, value stocks, energy stocks, and emerging market stocks outperforming the overall market.