Institutional Insights: Goldman Sachs - Year End Flow Of Funds Update
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Goldman Sachs Tactical Flow-of-Funds: GS Year-End Risk Clearing Checklist
Mechanical rebalance flows to create an institutional “FOMO” feedback loop into the best seasonals of the year.
ESA Index (S&P +236bps), NQA Index (NDX +186bps), RTYA Index (RTY +604bps), VIX -4.8 pts. These are the 5 biggest flows that I am tracking this morning (Unwinds of election hedges, Re-levering, Buybacks, FOMO, Vanna). The year-end rally starts today and may be higher than investors were expecting. I am open minded for a larger equity rally, led by #rotation nation.
Unwinds of short-dated election hedges create synthetic demand. For example, on Monday, the CBOE Index put/call ratio was the highest since September 24, 2021.
November corporate demand is the strongest month of the year. November/December is the strongest two-month period of the year. Estimate ~$6B worth of daily vwap demand in the 19 trading days of November. This may also have more potential demand impact during lower liquidity days in a late month Thanksgiving holiday/vacations.
Seasonals follow positive Target Date / 401k / PWM allocation rebalance flows "waiting for the event to clear." Historically, the S&P 500 yields an average return of 2.68% from November 5th to December 31st (1928 - ). In election years, the S&P 500 yields an average return of 3.38% from November 5th to December 31st (1928 - ).
Historically, the Nasdaq yields an average return of 5.53% from November 5th to December 31st (1985 - ). In election years, the Nasdaq yields an average return of 0.79% from November 5th to December 31st (1985 - ).
Historically, the Russell 2000 yields an average return of 5.70% from November 5th to December 31st (1979 - ). In election years, the Russell 2000 yields an average return of 7.94% from November 5th to December 31st (1979 - ).
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!