The S&P 500 Index has nowhere to go from here but down according to Goldman Sachs Group Inc. tactical strategist Scott Rubner who cautions “I am not buying the dip.”
That’s because this Wednesday, July 17, has historically marked a turning point for returns on the equities benchmark, the Goldman global markets division managing director said, citing data going back to 1928. And what follows, he says, is August — typically the worst month for outflows from passive equity and mutual funds.
Weak seasonality, stretched positioning and with all the good news already priced, the index is on the precipice of a summer correction. It’s a view Goldman’s trading desk has been leaning into since at least early June. “The pain trade is no longer higher from here,” Rubner wrote in a note to clients on Wednesday.
The S&P and the tech-heavy Nasdaq 100 slumped Wednesday on concerns about U.S. politicians taking a harder stance on China and Taiwan, which would affect global chipmakers.
The declines come after the S&P 500 hit 38 new all-time highs in 2024, putting the stocks gauge on pace for the second most closing highs in about 100 years, Rubner wrote, adding that only 1995 is shaping up to be stronger.
After that winning streak, stocks are left exposed to the weak inflows and remain vulnerable to negative headlines. There are no predicted inflows in August from passive investors or mutual funds as capital has already been deployed for the third quarter, Rubner said. As for trend-following systematic funds, positioning has reached maximum length, indicating there’s no room for further buying.
While some investors argue that strong earnings, a possible near-term interest rate cut from the Federal Reserve, and the rising odds of Donald Trump winning the U.S. presidential election would provide another boost for stocks, Rubner says they won’t be positive catalysts.
Such events are already getting priced into the market and the bar for earnings for the biggest technology stocks that drove market to record highs is remarkably high. “And by high, I mean they need to be great,” he wrote.
Rubner recommends clients buying the Nasdaq 100 and The S&P 500 December lookback put options, which allow the holder to exercise a derivative at the most beneficial price of the underlying asset, over the life of the option.
