News - Goldman Sachs Highlights Imminent Stock Selloffs Amid Volatile Markets

A turbulent period on Wall Street culminated with investors increasingly favoring safer options, propelling the Dow Jones Industrial Average upward. Over the course of this choppy year, approximately $6.25 billion in U.S. equities have been liquidated by commodity trading advisors (CTAs), notable for their systematic, rules-based trading which often amplifies market trends and triggers selloffs. Analyst Hafif indicates that the current level of global CTA investments in U.S. stocks is significantly elevated, by 90%, compared to the past five years. Goldman Sachs has identified a crucial medium-term threshold looming just under 1.5% away for the S&P 500, predicting substantial stock selloffs regardless of market direction. Should markets remain flat in the imminent week, a projected $15.37 billion in U.S. equities might be sold, escalating to $32.5 billion if markets decline, or tapering to $6.96 billion should the market witness an uptick. Projections for the coming month suggest $25.67 billion exiting U.S. stocks in a steady market, with $79.78 billion potentially offloaded in downward conditions, while a bullish trend might induce $9.34 billion in buying activity. Most of the stock inventory held by CTAs is within the S&P 500, with the Nasdaq still around 410 points from its medium-term benchmark, Hafif reported. Other significant automated strategies, such as risk parity and volatility control, also possess the capacity to offload more U.S. equities. These approaches, unlike CTAs, react more to sustained volatility changes and thus their influence is expected to manifest over a prolonged duration. Concerning retail investors, the analysts emphasized a notable decrease in willingness to persistently 'buy all dips' following a previous year focused heavily on that approach. This shift introduces additional complexity to a landscape already navigating multiple economic currents and evolving market sentiments.