Amid recent market turbulence, Scott Rubner, Managing Director and tactical specialist at Goldman Sachs Group, is anticipating a strong year-end rally for U.S. equities, with the S&P 500 potentially surpassing the 6,000 level. In a note to clients, Rubner expressed concern that his year-end target might even be “too low,” as favorable market conditions are poised to lift stock prices as 2024 draws to a close.
Rubner’s bullish outlook stems from historical data showing seasonal patterns in the stock market. Since 1928, the S&P 500 has typically gained an average of 4% between October 27 and the end of the year. This trend, coupled with a post-election shift where investors often rotate out of cash and back into equities, reinforces his optimistic projection.
Key Tailwinds for the Market
Rubner’s 6,000 target contrasts with Goldman Sachs’ chief U.S. equity strategist David Kostin, who recently set a more conservative year-end estimate of 5,600. The S&P 500 was trading around 5,700 on Wednesday, but Rubner remains confident that seasonal factors and improving sentiment will drive a larger rally.
A critical component of Rubner’s outlook is the resumption of corporate share buybacks. He highlights that U.S. companies are set to re-enter the market as buyers once the earnings-related blackout period ends on October 25. This influx of repurchases will likely provide strong support for stock prices, as firms take advantage of dips to bolster their share prices.
Additionally, Rubner notes that recent volatility has created short-term challenges, with the supply of U.S. stocks expected to exceed demand for the next few weeks. One factor contributing to this volatility is the $14 billion drop in the S&P 500 Index gamma over the last two days—one of the steepest two-day declines on record in Goldman’s dataset. This decline means that market dealers, who usually buy stocks on the dip to maintain neutral positions, are no longer as active in supporting stock prices.
Looking Ahead: Profit Opportunities and Market Analysis
Investors positioned to capitalize on the anticipated rally could see significant gains if Rubner’s forecast materializes. With the S&P 500 potentially exceeding 6,000, traders who enter at current levels could enjoy a roughly 5% to 6% upside through year-end. The return of corporate buybacks and the easing of market volatility present a timely opportunity for those with a bullish outlook on U.S. equities.
However, it’s important to remain cautious. Rubner acknowledges that the market will likely continue to experience bouts of volatility in the weeks ahead. Those with shorter time horizons may need to navigate these fluctuations before the expected rally takes hold in late October.
This rally could provide a welcome reprieve for investors after a challenging year marked by economic uncertainty, tightening monetary policy, and geopolitical tensions. With corporate buybacks set to boost demand and historical patterns suggesting a strong finish, there is an opportunity for tactical investors to ride the momentum into 2024.
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