During the latter part of this summer, Goldman's Prime Brokerage, the bank's dynamic client-facing division responsible for monitoring daily hedge fund activities, initiated the publication of the US Equities Weekly Rundown. This weekly compilation, a must-read for traders, consolidates the latest intelligence on positioning, flows, market themes, and actionable ideas from influential figures across the Goldman Sachs franchise. It offers valuable insights for serious traders seeking to understand Goldman's own traders' perspectives and actions, distinguishing itself from the bank's research desk. Below, we present excerpts from the most recent comprehensive report for the benefit of our premium and professional readers (the full analysis is available to our professional subscribers in the usual location).
Market Overview:
In the past week, the S&P 500 achieved a six-week consecutive rise, establishing new year-to-date highs. Investors navigated a week filled with significant macroeconomic data, anticipating upcoming events such as the release of US CPI and the latest central bank policy decisions. Noteworthy market movements included the outperformance of Bitcoin-sensitive stocks, those with high retail sentiment, and regional banks. Conversely, commodity-sensitive stocks, China ADRs, and renewables faced downward pressure.
Key Observations from Goldman's Trading Desk Divisions:
Prime Services:
Hedge funds (HFs) exhibited net buying in US equities after a four-week hiatus, driven by aggressive net buying in Macro Products.
Single stocks experienced net selling for the fifth consecutive week, with single stock short flow rising for a record 17th week.
Cumulative net flow for cyclical sectors reached fresh lows, led by short selling in Energy and long selling in Financials.
Shares Sales Trading:
Investors, cautious in light of perceived overdone rate moves and in anticipation of CPI and the Fed decisions, showed limited net additions.
Long-only buyers appeared in select laggard tech names and pockets of energy space, while large-cap tech supply and demand stabilized.
Derivatives Sales Trading:
The equity options market witnessed a significant increase in SPX gamma and a pursuit of IWM upside to address substantial short exposure in investor portfolios.
IWM call open interest reached all-time highs, with stress in the IWM vol market and an inverted volatility term structure.
Futures Sales Trading and Strategies:
Quarterly equity index rolls intensified, leading to richer implied funding levels in major US markets.
Clients with long futures positions were advised to switch to unlevered index positions for potential cost savings amid improving implied funding levels in the new year.
ETF Trading:
The market corrected a systemic underinvestment in value, with Russell Value seeing inflows while Russell Growth experienced outflows, a reversal of YTD trends.
Investors actively shifted from growth-based to value-centric funds, positioning for year-end and aligning with the Fed's objectives.
Retail Trading Flows:
Retail investors exhibited a significant increase in net buying of single stock shares, particularly notable for NDX 100 names.
However, the buying of call options by retail investors has waned, suggesting a potential reduction in the intensity of a "short squeeze."
Thematic Baskets and Macro Observations:
The US equity market achieved broad-based new highs, leading investors to pivot from factor rotation to identifying attractively valued soft landing beneficiaries.
A focus on the soft landing basket was recommended for new ideas, while expensive defensives remained a reliable short theme.
Sector Specialists Highlights:
Insights from the Goldman Sachs Financial Services Conference highlighted expectations of a 'soft landing' in 2024, with optimism tempered by concerns about rate cuts.
Consumer stocks, especially in retail, continued to perform well on positive holiday comments and strong margins.
This comprehensive overview provides a snapshot of the latest trends, actions, and sentiments across key divisions within Goldman Sachs, offering valuable insights for traders and investors alike.
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