Goldman Sachs global market director Scott Rubner said that the US stock market is expected to rebound by the end of the year, but only after experiencing unfavorable short-term situations such as technical positioning, capital flows, and pre-election anxiety. Scott Rubner stated in a client report last Friday: "Tactically, I am negative on the quarter end, but the objective is for the S&P 500 index to rebound by 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, marking the third largest reduction since 2019. This means that Wall Street traders will not buy on the dip to maintain a neutral position in the market.

Scott Rubner also predicts that in the next month or so, the selling pressure will increase. He stated that October is usually when actively managed mutual funds sell their worst-performing positions and prepare for year-end. At the same time, well-funded retirement funds are reducing their stock exposure and shifting towards investment-grade credit.

Scott Rubner stated that as the US presidential election approaches, institutional investors are selling favored long positions, buying S&P 500 put options spreads to hedge potential losses. He anticipates that more selling will come from hedge funds, which still have high risk exposure in the election, but typically reduce positions before the vote. More importantly, trend-following systematic funds are only bullish for the next five trading days, and commodity trading advisors (CTAs) are expected to sell $47 billion in US stocks next month if market sentiment turns negative.

Scott Rubner pointed out that as a result, recent trends will involve volatile trading, declining stock prices, and increased volatility. He believes that the situation will change after the election, and regardless of the winner, the S&P 500 index will experience year-end rebound driven by 'Fear of Missing Out (FOMO)', with the index rising to 6000 by the end of the year. He stated that investors may chase risk assets in November and December, reallocating cash in portfolios to stocks.

Scott Rubner stated that since 1900, the median return of the S&P 500 index in November and December of election years is 3.4%. He also predicts that once the dust settles on the election results, the breadth of the stock market will improve, with inflation-sensitive stocks, value stocks, energy stocks, and emerging market stocks outperforming the large cap market.

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