The Heisenberg report includes an interesting article by Goldman Sachs’ Scott Rubner about trading from the end of October through the end of the year.
Rubner suggests if you’re looking to buy the election dip, you may not get it, for the following reasons:
For the past 100 years, the last week of October through year-end has been one of the best trading seasons, and even more so during election years. That is, the median return from 10/28 through year-end is 5.2%; in election years, it’s 6.3%.
The fiscal year-end for most mutual funds is October 31, and as October winds up, the supply overhang from mutual funds and pensions lifts.
The corporate Buyback blackout period, which is usually two weeks before the quarter ends through 48 hours after earnings are released publicly, also starts lifting,
Buybacks are one of the largest sources of demand for US equities. November stands out. Goldman’s corporate execution desk expects $960 billion worth of executed buybacks this year. So, simple math suggests next month could see ~$100 billion worth.
Then there’s the thinner markets around Thanksgiving and Christmas, which could lead to a more pronounced effect of large-scale buying on stock prices.
Scott was straightforward. “The global consensus on Wall Street is that we will dip after the election, and investors are waiting for the (-5%) dip to add,” he wrote, adding that he doesn’t see it. “I think the US election will be a clearing event for risk assets and re-risking may happen quickly,” he said.
In another article he goes on to add that FOMO or the (Fear Of Missing Out) would be another factor driving stocks higher, should the much-anticipated pullback during and after the elections not materialize.
Rubner has a 6,000 year-end target for the S&P 500, which may turn out to be conservative.
