US Equities Weekly Rundown 10-13-23pdf
US Equities Weekly Rundown 10-13-23pdf
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  1. Prepared by Prime Brokerage. In evaluating this material, you should know that it could have been previously providedto other clients and/or internal Goldman Sachs personnel, who could have already acted on it. The views or ideas expressed here are those of the desk and/or author only and are not an official view of Goldman Sachs; others at Goldman Sachs may have opinions or may express views that are contrary to those herein. This material is not independent advice and is not a product of Global Investment Research. This material is a solicitation ofderivatives business generally, only for the purposes of, and to the extent it would otherwise be subject to, CFTC Regulations 1.71 and 23.605.Global Banking & Markets October13, 2023US EquitiesWeekly RundownPositioning, Flows, and Observations Across the FloorPortfolio Manager’sSummaryUS stocks fellon Fridaybutstill managed to recorda modest gain for theS&P500thisweek, asmarket participantsdigest adrop in consumer confidence andthe first set of Q3 earnings reportswith Banks in focus. Obesity Drugs, Commodity Sensitive, and Bond Proxieswere among the top gainers, whileMost Short,Non Profitable Tech, and Low Profit R2Kunderperformed.Prime:US equities were modestly net boughton the week, driven by Macro Products as Single Stocks saw little net activityintothe startof earnings season.Comm Svcs, Health Care, and Industrials were the mostnet bought sectors, all driven by short covers, whilesectors with high dividend yields includingStaples, Utilities, and Real Estatewereamongthe most net sold.SharesSales Trading:HFsendedthe week 50bps better to buy driven by covering early in the weekand continue to encourage a move lower in the market, despite technical dynamics that point to a short term bounce. The long only community finished 10bps better for saleand remains anxious with onlymodest demand in defensive/high qualitystocks such as mega cap tech.Derivatives Sales Trading:The VIX complex was under asignificant amount of stresson Friday, with a sharp increase in call volume ultimately causing a massive bid to vol of vol (VVIX).Froma microperspective, GIRnotedthat we are seeing positive estimate revisions for the first time since 2021with 19% upside to the average S&P 500stock over the next 12 months. Given relatively low net positioning and elevated call skew, we like call spreads or ratio call spreads in the HF VIP complex.Futures Sales Trading and Strats: The steady downtrend in S&P futures risk into CPI was likely driven by short covering or hedge unwinds, as it coincided with dovish Fed comments, richer funding, and cheaper put-call skew. Entering Friday, buying from CTAs was projected to extend based on GS Futures Strats’ framework, but flow forecasts could fluctuate in the next few sessions asspot remains close to key momentum thresholds. The apparent Fed shift, plus geopolitical risk premium, also boosted Gold. ETF Trading:The desk sawcontinued movement within the Emerging Marketscomplexand first signsof demand in pockets such as Taiwan/Chinahelping to move EEM off of redemption bounds.However, the Asia allocation was in part funded by a risk-off tone in MENA, withKSA(MSCI Saudi Arabia) seeing its largest redemptionin 16 months on Wednesday.Baskets& Macro Themes:Five most topical tradesto considerwith higher real rates, Q3 earningsseason kicking off, and rising geopolitical tension:1. Mutual fund tax loss selling (GSCBMF23).2. Non profitable tech (GSXUNPTC) & profitable vs unprofitable growth (GSPUHGMP).3. Low profit small caps (GSCBNPR2). 4. Onshoring (GSXUSHOR). 5. AI (GSTMTAIP).Sector Specialists:The focus on the disruptive potential of GLP-1 accelerated further, withour GLP-1 Risk basket(GSHLCGLP) down -9% this week alone–near-term debate is whether thesell-off in many HC segments have come too far too fast and could more constructive results from the upcoming Q3EPS seasonprovide some reprieve. InFinancials, large cap banks kicked off earnings and the takeaways were: smaller reserve builds, inline credit (ex office CRE), NII beats, NII guide ups, and better capital.What We Are Readingand Listening toThis WeekUS Equity Views: S&P 500 cash spending in 2024:Prioritizinginvesting for growth over returning cash to shareholders(link).Americas Clean Technology: Weighing in on Key Debates in Utilities and Solar following recent volatility(link).Track these themes with the GS Custom Baskets Launchpadon BloombergFor access:please reach out to your sales coverage and gs-gssu-permissioning@gs.comSource: Bloomberg, Goldman Sachs FICC and Equities data as of 13-Oct-23. Past performance is not indicative of future results.S&P 500Nasdaq 100Russell 2000STOXX 600Nikkei 225CSI 300SPX 1-M Realized CorrelationVIX10Y USTUS DollarWTI FutureGold FutureBitcoinLevel4,327.7814,995.121,719.71449.1832,315.993,663.4131.2%19.254.62%106.6787.711,928.5026,760.32WoW Chg0.4%0.1%-1.5%1.0%4.3%-0.7%2.6 pp10.3%-0.18 pp0.6%5.9%5.4%-4.4%YTD Chg12.7%37.1%-2.4%5.7%23.8%-5.4%-24.6 pp-11.2%0.75 pp3.0%9.3%5.6%61.4%BasketTickerWoW Price ChgYTD Price ChgBasketTickerWoW Price ChgYTD Price ChgObesity DrugsGSHLCBMI4.82%34.12%HF VIP vs Most ShortGSPRHVMS4.13%29.61%Commodity SensitiveGSXUCOMO4.30%0.16%Hi Growth Hi Margin vs Lo MarginGSPUHGMP3.33%19.06%Govt Shutdown RiskGSXUGOVT2.07%10.68%MegaCap Tech vs Non Profitable TechGSPUMENP3.28%42.79%MF Tax Loss Selling 2023GSCBMF231.32%-19.75%China vs US InternetGSPRUCIT3.15%-24.68%Bond ProxiesGSXUBOND1.28%-14.75%High Stable vs Low Variable Gross MarginGSPUGMPT2.93%13.05%BasketTickerWoW Price ChgYTD Price ChgBasketTickerWoW Price ChgYTD Price ChgMost Short RollingGSCBMSAL-3.84%-3.87%New Tech vs Expensive DefensivesGSPUNEXT-2.46%48.88%Non Profitable TechGSXUNPTC-2.98%11.81%China vs US Sales ExposureGSPRCHSL-2.42%8.33%Go OutsideGSXUPAND-2.61%-3.28%Secular Growth vs Bond ProxiesGSPUSGBO-1.69%48.92%High Beta SensitivityGSXUBFBL-2.38%4.22%Cyclicals/Defensives ex-CommoditiesGSPUCYDE-1.22%10.15%Low Profit R2KGSCBNPR2-2.27%1.86%Consumer Services vs GoodsGSPUSVGD-0.89%5.73%Macro/Thematic Baskets: Top Perfomers This weekMacro/Thematic Pairs: Top Perfomers This weekMacro/Thematic Baskets: Bottom Perfomers This weekMacro/Thematic Pairs: Bottom Perfomers This week
  2. Prime Services(Week Ending 10/12/23)Vincent Lin, CFAvincent.lin@gs.comMarco Laicini, PhDmarco.laicini@gs.comErin Tolarerin.tolar@gs.comFreddie Parker, CFAfreddie.parker@gs.comAsset Weighted Risk Exposures: US Fundamental L/SGross leveragerose+2.1ptsto 194.8% (92ndpercentile one-year), while US Fundamental L/S Net leverageincreased+1.8ptsto 53.3% (70thpercentile one-year).Aggregate US Fundamentallong/short ratiofinished up +1.4%on the week to 1.75(59th percentile one-year).Trading Flows: Overall US equities were modestly net boughton the week (+0.3SDs vs. the past year),drivenby risk on flows with long buys outpacing short sales(~2to 1).•Macro Products–Index and ETF combined–made up more than 90% of the total notional net buyingin USequities (+0.3SDs),drivenby long buys outpacing short sales. •Single Stocks saw little net activity on the week, driven by long buys marginally outpacing short sales, andnotional flows were fairly muted on both sides into the start of Q3earnings season.US Single Stock short flowincreased for a 10thstraight week, though this week’s notional short flow was the smallest in 6 weeks. oComm Svcs, Health Care, and Industrialswere the most notionally net bought sectors,all driven by short covers,while Consumer Staples(short sales), Info Tech(long sales),Utilities(long-and-short sales), and Real Estate(short sales) were the most net sold.oConsumer Staples was the most notionally net sold US sector on the Prime book this week (2ndmost net sold in standard deviations terms behind Utilities), driven by heavy short salesoutpacing long buys ~4 to 1.Staples short flow has increased for 6 straight weeks, and this week’s notional short selling was the largest in 3 months(in the 98thpercentile vs. the past 5 years).Nearly all Staples subsectors were net sold on the week (except Staples Distribution &Retail), led by Household Products, Beverages, and Food Products.LeverageGross %Net %L/S Ratio (MV)Current194.853.31.75WoW Chg2.1pt1.8pt1.4%MoM Chg-0.4pt-1.7pt-1.7%YTD Chg13.3pt3.3pt-0.4%Current 1-Yr %ile92%70%59%Current 3-Yr %ile97%39%22%Current 5-Yr %ile98%58%35%US Fundamental L/S (Asset Weighted)Gross Leverage (%, left) Net Leverage (%, right)US Fundamental L/S: Gross vs. Net Leverage1551601651701751801851901952004042.54547.55052.55557.56062.56567.57072.5JanJulJanJulJanJulJanJulJanJul20192020202120222023US Fundamental L/S: Long/Short Ratio (MV)1.61.651.71.751.81.851.91.9522.052.12.152.22.25JanJulJanJulJanJulJanJulJanJul20192020202120222023
  3. Source for all graphs and tables: Goldman Sachs FICC, Equities, and Prime Services data as of 13-Oct-23. Past performance is not indicative of future results.Long Flow Short Flow Net FlowPB Trading Flows: US Equities (Positive Value = Buy or Cover)% of Total US Net MV at Start of 2023-50%-40%-30%-20%-10%0%10%20%30%40%JanFebMarAprMayJunJulAugSepOct2023Single Stocks Macro Products (Index + ETF)PB Net Trading Flow By US Product (Positive Value = Buying)% of Total US Net MV at Start of 2023-14%-12%-10%-8%-6%-4%-2%0%2%4%6%8%10%JanFebMarAprMayJunJulAugSepOct2023TMT Consumer Disc Cyclicals DefensivesPB US Net Trading Flow (Positive Value = Buying)% of Total US Net MV at Start of 2023-8%-6%-4%-2%0%2%4%6%8%10%JanFebMarAprMayJunJulAugSepOct2023-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.5Standard Deviations (1-Year)Prime Book: Cumulative US Net Trading Flow5-Day Net Flow20-Day Net FlowBUYINGSELLING
  4. US SharesSales TradingJoe Anastasiojoseph.anastasio@gs.comMatthew Kaplan, CFAmatthew.kaplan@gs.comMarket narrative this week dominated by ongoing turmoil and atrocities in the Middle East. Most topical themes from this week: (1) issuance calendarfollowing BIRK’s IPO, (2) GLP-1 maniafollowing positive updates from NVO, (3) weaker treasury auctions, (4) tight enough (?) commentaryfrom Fed speakers, (5) a big move higher in crude, and (6) the start of Q3 earnings seasonwith the big banks having better than feared reports on Friday.Anxiety and paralysis continue to dominate conversations with investors. Hedge Funds continue to encourage a move lower in the market,despite ongoing technical dynamics (CTAs, upcoming MF year end, positive Nov seasonality) that point to a short term bounce in the markets. Hedge funds finished the week 50bps better to buy driven by covering early in the week. Rates and crude continue to drive sentiment for this group, with a much welcomed reprieve as 10yr yields look to end the week roughly flat.The long only community finished the week 10bps better for sale. This community remains anxious with only small pockets of demand in defensive/high quality pockets such as megacap tech early in the week. Source:Goldman Sachs FICC and Equities data as of 13-Oct-23. Past performance is not indicative of future results.
  5. Futures Sales Trading and StrategiesRobert Quinnrobert.quinn@gs.comPaul Leyzerovichpaul.leyzerovich@gs.comMason Fennellymason.fennelly@gs.comHeading into the CPI release on Thursday, S&P E-Mini futures risk exhibited a steady downtrend. That is, aggregate open interest declined in 5 of 6 sessions from October 3rd–11thfor a net -$20bn. Given this coincided with dovish Fed communication, positive price action, richer funding levels, and cheaper put-call skew, short covering or hedge unwinds appeared the main driver. Per Commitment of Traders, released today, Dealer shorts actually declined the most through the 10th. And bearish posturing across Non-Dealers increased. Though the data did omit one session with a large OI decline.Following the strong CPI print, poorly received bond auction, and subsequent equity wobble, S&P E-Mini open interest rebounded by a decent $6.7bn. Funding was stable, suggesting both longs and short engaged. With respect to CTA’s, GS Futures Strategists’ framework corroborated the general view that downside reduction occurredprior to the inflation data. Entering Friday, buying was projected to extend. However, spot remains close to key momentum thresholds. Therefore, flow forecasts could fluctuate in the next few sessions.Source: Goldman Sachs FICC and Equities, Futures StratsGroup as of October-2023. Past performance is not indicative of future results.The apparent Fed shift, plus geopolitical risk premium, also boosted Gold. Option flows were particularly interesting. Three month normalized 25 delta put-call skew registered its largest 3 day drop since the regional bank crisis. As implied volatility and put aggregate open interest increased, call buying dominated. CTA’s arguably did not contribute, though buying could commence if Friday’s price action holds.
  6. Source: Goldman Sachs FICC and Equities, Futures StratsGroup as of October-2023. Past performance is not indicative of future results.
  7. ETF TradingSerena Tchorbajianserena.tchorbajian@gs.comJackson Isaacsjackson.isaacs@gs.comOne thing that stood out this week on the GS ETF desk was the continued movement within the Emerging Market complex.The desk saw its first signsof demand in pockets such as Taiwan/Chinathis week (reminder of the $5B+ outflows in EM over past two months) helping to move EEM off of redemption bounds.However, the Asia allocation was in part funded by a risk-off tone in MENA, with KSA (MSCI Saudi Arabia) seeing its largest redemption in 16 months on Wednesday.With the Saudi market being closed on Friday, KSA ended the week at a 2.25% discount to the local Thursday close, and something to monitor into Monday (especially notable with the move Friday inCrude).KSA Flows, YTD:Source:Goldman Sachs FICC & Equities as of October2023. Past performance is not indicative of future results.
  8. Derivatives Sales TradingErin Briggserin.brigg@gs.comBrian Garrettbrian.garrett@gs.comLee Coppersmithlee.coppersmith@gs.comCullen Morgancullen.morgan@gs.comMacro:The VIX complex was under a huge amount of stress today –UX1 (front-month VIX future) outperformed its beta to SPX by +1.8v –one of the largest outperformances ever for the VIX complex (this got as high as +2.7 intraday). This essentially suggests UX1 was up 1.8 points more than the move in SPX would suggest. Source:Goldman Sachs FICC & Equitiesas of October2023. Past performance is not indicative of future results.VIX call volume exploded with 1.37m contracts trading, ultimately causing a massive bid to vol of vol (VVIX Index) -We saw clients buying short dated call spreads to take advantage of the extremely elevated call wing.Source:Goldman Sachs FICC & Equitiesas of October2023. Past performance is not indicative of future results.
  9. Source:Goldman Sachs FICC & Equitiesas of October2023. Past performance is not indicative of future results.When running a 5-year regression, the move in VVIX today is more commonly seen with SPX down 2%.Source:Goldman Sachs FICC & Equitiesas of October2023. Past performance is not indicative of future results.
  10. Despite the stress, VIX managed to close below 20 for the 102ndconsecutive session.Source:Goldman Sachs FICC & Equitiesas of October2023. Past performance is not indicative of future results.Micro:John Marshall and team notethat we are seeing positive estimate revisions for the first time since 2021 and our analysts see 19% upside to the average S&P 500stock over the next 12 months. With that said, implied vol earnings day moves are elevated vs historical average. Givenlow net positioning and elevated call skew, we like call spreads or ratio call spreads in the HF VIP complex.
  11. Average call skew (25dc/ATM) in our HF VIP constituents is in its 74thpercentile vs the last 18months:Source:Goldman Sachs FICC & Equitiesas of October2023. Past performance is not indicative of future results.
  12. Thematic Baskets and Macro ObservationsLouis Millerlouis.miller@gs.comFaris Mouradfaris.mourad@gs.comJulia Maschjulia.masch@gs.comReal rates are up ~50bps in the last month, 3Q earnings season is kicking off, and geopolitical tension is rising globally, we share our five most topical trades:1.Mutual fund tax loss selling (GSCBMF23)2.Non profitable tech (GSXUNPTC) & profitable vs unprofitable growth (GSPUHGMP)3.Low profit small caps (GSCBNPR2)4.Onshoring (GSXUSHOR)5.AI (GSTMTAIP)1. MF tax loss selling (GSCBMF23)772 Active mutual fund, managing $1.8T in AUM (~23% of total active MF AUM), have their fiscal year-ends in October. These funds tend to sell their underperformers to offset some of their tax gains,which drives these stocks to lag the market further at this time of year.GSCBMF23 is composed of stocks most held by active MFs that have sold off the most YTD. We expect this basket to continue to underperform the market through month endand outperform when these funds buy back their favorite stocks as we get closer to the new year.Source:Goldman Sachs Global Investment Research, as of Oct-2023.
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