Goldman’s Scott Rubner is “back on all-time high watch.”
Writing Monday at the beginning of the last week of August, Rubner said that should the S&P manage to set its first record since mid-July, investor FOMO could take hold.
Recall that Rubner came into August bearish for a laundry list of reasons, not least of which were the challenging seasonals. His skepticism was borne out pretty much immediately, when risk assets swooned amid an improbably large VIX spike and a broader vol reset that triggered a quick bout of de-leveraging from systematic cohorts.
Once the fireworks subsided and vol began to revert lower, Rubner turned constructive, describing a four-week FOMO window looking out to mid-September. He reiterated the basic tenets of that call on Monday.
“The pain trade for equities is higher into mid-September after the green light was given on Friday to re-lever,” Rubner said. The “green light” was obviously Jerome Powell’s Jackson Hole address. “Everyone is going back to the pool,” he wrote, in the course of flagging $17 billion of equity demand per day this week from systematics and corporates — i.e., robots and buybacks.
The figure above gives you a sense of how much catching up to do systematics have between them. CTAs re-risked quickly in true “first mover” fashion, but vol control had to wait on the signal from trailing realized, which just started to turn on the one-month lookback late last week. Risk parity hasn’t re-leveraged at all yet.
As for the corporate bid, Goldman’s buyback desk saw “the largest weekly demand of 2024,” last week, Rubner remarked. As a reminder, August-September is the second-strongest two-month window of the year for buybacks, with nearly 21% share. Rubner estimates $6.62 billion of daily corporate purchasing power from now through mid-September, when the next earnings blackout rolls around. (That’s prospective flow, obviously. It’s not pre-ordained.)
Speaking of earnings — Nvidia! They report this week. And as Bloomberg’s Cameron Crise noted on Monday, the company’s update is a big deal. Have a look at the chart on the left, below, from Crise’s piece on the terminal (as always, you should click to enlarge the visuals).
The math is simple: Crise multiplied Nvidia’s daily change by its weight in the index, then took the five-day rolling sum. The figure on the right, from Goldman, shows the evolution of Nvidia’s heft in the index.
“You can see the impact of the AI theme (and bubble) via the explosion in the amplitude of the contribution,” Crise wrote, of his chart, adding that using the same math, the only other comparable example is Apple in 2020. Using a two-week rolling window, “Nvidia blows away anything that we have seen from Apple or Microsoft over the years,” he added.
“Can you imagine if NVDA beats expectations on Wednesday?” Goldman’s Rubner mused, pointing to the figure below.
According to Goldman’s prime desk, info tech was net sold again last week, the 13th week of net selling in 16.
The prime book, Rubner went on, is now underweight Info Tech by nearly 1,000bps. As the figure shows, that’s the lowest level in the bank’s records. To echo Scott: “Can you imagine if NVDA beats expectations?”
