US_Equities_Weekly_Rundown_3-22-24pdf
US_Equities_Weekly_Rundown_3-22-24pdf
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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 of derivatives 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 March22, 2024US EquitiesWeekly RundownPositioning, Flows, and Observations Across the FloorPortfolio Manager’sSummaryUS stocks finished the week higher(SPX +2.3%, NDX +3.0%, R2K +1.6%)as investorsdigested central banknews, stronghousing data, and positive AI catalysts.Housing Exposure, Infrastructure, and AI Hardware/Data Centerswere among the biggest gainerson the week, whileChina ADRs, High Beta 12M Losers, and AI-at-Riskunderperformed.Prime:USequities were net boughtacross both Macro Productsand Single Stocks, as long buys outpaced short sales.US Single Stock shorts have increased in 12of the past 13weeks. Hedge fundsbought Defensives at the fastest pace in 3 months,driven by long buying in Health Care and Staples. SharesSales Trading:It was a strong week for US Equities, and our desk was moderately active, with LOs finishingthe week $300m net to buy, HFs $-2bn for sale. The MTD LO net selling sits at -$7bn and HFs -$4.8bn MTD. We saw the heaviest selling in Info Tech, Comm Svcs, and Consumer Disc. Buying was most pronounced in Materials, Healthcare, and Industrials.Futures Sales Trading/Strats:As records abound in Bitcoin futures, so did total open interest this week with over 33k contracts, or $12b,outstanding.Alongsidethis, the futures implied funding has remained elevated.In equities, total SPX futures open interest reached a near record level of around $700bn before expiration last Friday, before falling to $530bn on the Monday after,but has edged higher since. We estimate that the general long length and pressure remains, as evidenced by the futures implied funding, which has remained at an above-average F+60 bps or more this week following expiration.Derivatives Sales Trading: With the S&P finishing its best week of 2024, we’ve seen the S&Pvol term structure collapse, particularly in the front-end. Looking at the VIX9D Index (Cboe S&P 500 Short Term Volatility Index)is another way to look at how much short-dated implied vol has come in. The desk likes swapping delta positions into index options as a result.Baskets& Themes:Almost done with Q1. What’s working? Opportunitiesacross the artificial intelligence ecosystem, onshoring and infrastructure trends, obesity drugs, and aerospace. What’s not working? Interest rate sensitive areas of the market. What we’re watching? Refiners, Small Cap Quality, US Elections, and European Defense. Sector Specialists:In Consumers, earnings updates from the last 2 weeks sounded a more guarded tone, with many companies speaking to a slower US consumer. We do not think it is a widespread and concerning slowdown, but it is something that is now worth watching. In Healthcare, the sector saw one large premium(+97%) M&A announcement, and on the capital markets front, all eyes on IPO/Secondary performance in Tech and EU HC this week.While on balance news flow from SMID biotechs skewed positively, the XBI continued to struggle. In Pharma, the GLP-1 complex remained top-of-mind on the week.What We Are Readingand Listening toThis WeekUS Equity Views: Updating our 2024 US equity demand forecasts(link)Goldman Sachs Research’s Greatest Hits:Key moments in tracking cycles, innovation, and change(link)Global Metals & Mining:Copper Leaching Breakthrough Technologies(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 22-Mar-24. Past performance is not indicative of future results.S&P 500Nasdaq 100Russell 2000STOXX 600Nikkei 225CSI 300SPX 1-M Realized CorrelationVIX10Y USTUS DollarWTI FutureGold FutureBitcoinLevel5,234.1818,339.442,072.00509.6440,888.433,545.0017.4%13.064.20%104.4280.892,167.4063,583.09WoW Chg2.3%3.0%1.6%1.0%5.4%-0.7%-4.2 pp-9.4%-0.10 pp1.0%-0.2%0.3%-6.3%YTD Chg9.7%9.0%2.2%6.4%22.2%3.3%0.4 pp4.9%0.32 pp3.0%12.9%4.6%51.6%BasketTickerWoW Price ChgYTD Price ChgBasketTickerWoW Price ChgYTD Price ChgHousing ExposureGSXUHOME5.14%13.27%AI Hardware vs Tech ex AIGSPUDATA4.45%16.45%InfrastructureGSXUINFS4.73%20.42%Power vs UtilitiesGSPUPOWR4.15%22.63%High Beta 12M WinnersGSCBHMOM4.69%28.80%AI Beneficiaries vs At RiskGSPUARTI3.08%29.56%AI Hardware/Data CentersGSTMTDAT4.66%19.78%New Tech vs Expensive DefensivesGSPUNEXT2.90%5.73%Power Up AmericaGSENEPOW4.43%20.56%GLP-1 Exposed vs At RiskGSPUGLPP2.70%21.92%BasketTickerWoW Price ChgYTD Price ChgBasketTickerWoW Price ChgYTD Price ChgChina ADRsGSXUCADR-3.31%-5.97%China vs US InternetGSPRUCIT-5.42%-13.30%High Beta 12M LosersGSCBLMOM0.46%-8.57%Quality Compounders vs Over-Earning CyclicalsGSPUQCCY-2.65%-9.28%Bitcoin Sensitive EquitiesGSCBBTC10.49%43.89%L/S StagflationGSPUSTAG-1.79%-7.69%Quality CompoundersGSXUCOMP0.74%3.93%Low vs High Stock Based CompGSPUSBCP-1.30%-0.84%AI-at-RiskGSTMTAIR0.74%-3.54%GS QI HY SpreadsGSPQSPRD-1.25%-4.35%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 ServicesVincent 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 leverageincreased +3.1ptsto 195.7% (91stpercentile three-year), while US Fundamental L/S Net leveragedecreased-0.8ptsto 55.1% (57thpercentile three-year).Aggregate US Fundamental long/short ratiodecreased-1.8%on the week to 1.784(38thpercentile three-year).Trading Flows: US equities were net bought as gross trading activity increased on the week, with long buysoutpacingshort sales (5.2 to 1).•Net buyingin US Macro Products–Index and ETF combined–was ledby short covers.US-listed ETF shorts decreasedby-2.3%,led by covering in Sectors ETFs.•Net buyingin US Single Stockswas driven by longbuys outpacingshort sales(1.3to 1). US Single Stockshorts have increased for 12of the last 13weeks.•Health Care, Staples, and Energywere the most notionally net boughtUS sectors, while Industrials, Communication Services, and Utilitieswere the most net sold.•US Defensives saw the largest net buying in over 3 months, driven by long buying in Health Care and Staples, which outweighed modest net selling in Utilities. Cyclicals minus Defensives as a % of Total US Net Exposure still stands at 8.5%,well above 5-year lows of 4.3% in the start of 2024.LeverageGross %Net %L/S Ratio (MV)Current195.755.11.784WoW Chg3.1pt-0.8pt-1.8%MoM Chg3.4pt0.3pt-0.8%YTD Chg-1.5pt2.8pt3.7%Current 1-Yr Percentile73%73%61%Current 3-Yr Percentile91%57%38%Current 5-Yr Percentile95%62%40%US Fundamental L/S (Asset Weighted)Gross Leverage (%, left)Net Leverage (%, right)US Fundamental L/S: Gross vs. Net Leverage1551601651701751801851901952004042.54547.55052.55557.56062.56567.57072.5JulJanJulJanJulJanJulJanJulJan201920202021202220232024US Fundamental L/S: Long/Short Ratio (MV)1.61.651.71.751.81.851.91.9522.052.12.152.22.25JulJanJulJanJulJanJulJanJulJan201920202021202220232024
  3. Cyclicals = Energy + Materials + Industrials + Financials + Real EstateDefensives = Staples + Health care + UtilitiesvSource for all graphs and tables: Goldman Sachs FICC, Equities, and Prime Services data as of 22-Mar-24. Past performance is not indicative of future results.Cyclicals minus DefensivesPrime Book % of Total US Net Exposure (MV)4%6%8%10%12%14%16%18%20%22%24%26%28%30%JulJanJulJanJulJanJulJanJulJan201920202021202220232024Long FlowShort FlowNet FlowPB Trading Flows: US Equities (Positive Value = Buy or Cover)% of Total US Net MV at Start of 2023-70%-60%-50%-40%-30%-20%-10%0%10%20%30%40%50%JanFebAprMayJunJulAugSepOctNovDecJanFebMar20232024Single StocksMacro Products (Index + ETF)PB Net Trading Flow By US Product (Positive Value = Buying)% of Total US Net MV at Start of 2023-16%-14%-12%-10%-8%-6%-4%-2%0%2%4%6%8%10%JanFebAprMayJunJulAugSepOctNovDecJanFebMar20232024TMTConsumer DiscCyclicalsDefensivesPrime US Net Trading Flow (Positive Value = Buying)% of Total US Net MV at Start of 2023-16%-14%-12%-10%-8%-6%-4%-2%0%2%4%6%8%10%JanFebAprMayJunJulAugSepOctNovDecJanFebMar20232024-2.0-1.5-1.0-0.50.00.51.01.52.02.53.0Standard 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.comA strong week for equities with NDX +3%, SPX +2.3%, RTY +1.7% driven initially by the Fed Wednesday, where Powell and team showed 3 cuts in the dots along with a strong SEP (upward revisions to GDP). That was followed up with dovish global central bank messaging (ECB held, SNB surprise cut, BOE commentary) and few positive micro AI data points (AVGO analyst day), MU earnings). NVDA finished the week +7.3%.Both Housing Starts and New Home Sales handily beat expectations, contributing to a +5.2% move in our US Housing basket this week. Mall Levered Retailers finished the week +4.6% (Positive GES, GPS updates).Our desk was moderately active with LOs finished the week $300m net to buy, HFs $-2bn for sale. The MTD LO net selling sits at -$7bn and HFs -$4.8bn MTD.We saw the heaviest selling in Info Tech, followed by Comm Svcs, and then Consumer Disc. Buying was most pronounced in Materials, Healthcare, and Industrials.Source: Goldman Sachs FICCand Equitiesdata as of 22-Mar-24. Past performance is not indicative of future results.35003700390041004300450047004900510053005500-70,000-60,000-50,000-40,000-30,000-20,000-10,000010,00020,000Jan-22Feb-22Mar-22Apr-22May-22Jun-22Jul-22Aug-22Sep-22Oct-22Nov-22Dec-22Jan-23Feb-23Mar-23Apr-23May-23Jun-23Jul-23Aug-23Sep-23Oct-23Nov-23Dec-23Jan-24Feb-24Mar-24US Equities: Aggregate Institutional Net Flows (Cumulative Notional)Aggregate LO Net Flow (left)Aggregate HF Net Flow (left)SPX Price (right)
  5. Futures Sales Trading and StrategiesRobert Quinnrobert.quinn@gs.comPaul Leyzerovichpaul.leyzerovich@gs.comMason Fennellymason.fennelly@gs.comRecords abound in Bitcoin futures. As prices hit a record high above $73k, total open interest did as well this week above 33k contracts outstanding or nearly $12bn. The total number of organizations holding the contract (in size above the CFTC reportable-trader level) is at a near-record also. Finally, in the most recent week we currently have data –5-12 March –institutions, a category which is likely to include ETP product usage of Bitcoin futures, were more than 3x std-dev buyers while hedge funds or Leveraged investors were offsetting, more than 3x std-dev net sellers. The institutional net long and hedge fund net short lengths are at record levels as a result, and the concentration of longs –the percentage of total open interest held by the top 4 net long traders at nearly 60% –is well above average levels. Alongside this, the futures implied funding has also remained elevated, at commonly above 10% annualized since Q4 last year during Bitcoin’s price runup –it started 23Q4 below $30k –and sometimes above 15%. We’re seeing a price sell off at time of writing today, with the front future down more than 3% on the day to $63k.In equities, total SPX futures open interest reached a near record level of around $700bn before expiration last Friday, before falling to $530bn on the Monday after expiry and edging higher since then, which is one of the larger expiry-related open interest drop changes but overall common enough behavior for the event (and some of the TOI is mechanically and seasonally built during the roll-period before expiry). We estimate that within the systematic community CTA/trend followers remain net long, and risk-parity style strategies have been gradual buyers in recent months, with length above multi-year average levels as e.g. SPX 6-12mth realized vol is not far form 5-year lows. Other institutional length is net long also, including the mutual fund community using futures, and against this banks/dealers,hedge funds like equity L/S and basis-arbitrage traders are likely net short futures. Overall, while some squaring or cleaning up of positions is inevitable given the sizable TOI change, and includes things like futures being used to hedge options positions also expiring last Friday, we estimate that the general long length and pressure remains, given some of the fundamental and technical drivers –of positive price trend, lower vol, macro backdrop, etc –and as evidenced by the futures implied funding, which has remained at an above-average F+60 bps of more this week following expiration.
  6. Source: CFTC, Commodity Systems Inc. and Goldman Sachs FICC and Equities, Futures Strats Group. Past performance is not indicative of future results.Indicative Terms/Pricing Levels: This material may contain indicative terms only, including but not limited to pricing levels. There is no representation that any transaction can or could have been effected at such terms or prices. Proposed terms and conditions are for discussion purposes only. Finalized terms and conditions are subject to further discussion and negotiation.Risk Disclosure Regarding futures, options, equity swaps, and other derivatives as well as non-investment-grade securities and ADRs: Please ensure that you have read and understood the current options, futures and security futures disclosure document before entering into any such transactions. Current United States listed options, futures and security futures disclosure documents are available from our sales representatives or at http://www.theocc.com/components/docs/riskstoc.pdf, http://www.goldmansachs.com/disclosures/risk-disclosure-for-futures.pdfand https://www.nfa.futures.org/investors/investor-resources/files/security-futuresdisclosure.pdf, respectively. Certain transactions -including those involving futures, options, equity swaps, and other derivatives as well as non-investment-grade securities -give rise to substantial risk and are not available to nor suitable for all investors. If you have any questions about whether you are eligible to enter into these transactions with Goldman Sachs, please contact your sales representative. Foreign currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of, or income derived from, the investment. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk.Virtual Currency Derivatives Risk Disclosures: Virtual currency derivatives may trade at a value other than that which may be inferred from current values of the underlier due to factors including, but not limited, high volatility, low liquidity and high market concentration in the underlier as well as the fact that there may be significant variations in publicly available pricing sources. Virtual currency derivatives give rise to substantial risk and are not available to nor suitable for all investors. Please ensure that you have read and understood the current Disclosure Annex for Virtual Currency Transactions before entering into any transactions, which may be found at https://marquee.gs.com/regulatorydisclosures/as well as information published by regulators including, but not limited to, "NFA Investor Advisory -Futures on Virtual Currencies Including Bitcoin" found at https://www.nfa.futures.org/investors/investor-advisory.html. If you have any questions about whether you are eligible to enter into these transactions with Goldman Sachs, please contact your sales representative.
  7. Derivatives Sales TradingErin Briggserin.brigg@gs.comBrian Garrettbrian.garrett@gs.comLee Coppersmithlee.coppersmith@gs.comCullen Morgancullen.morgan@gs.comGillianHoodgillian.hood@gs.comThe S&P just finished its best week of 2024 following this week’s events. We’ve also now seen the S&P vol term structure collapse, particularly in the front-end.Source: Goldman Sachs FICC and Equities as of 22Mar24. Past performance is not indicative offuture results
  8. Another way to look at how much short-dated implied vol has come in is by looking at VIX9D Index (Cboe S&P 500 Short Term Volatility Index). We’ve only seen thisgauge lower on a handful of days over the last year. The desk likes swapping delta positions into index options as a result ... The S&P implied move thru next month (Apr 30thexpiry) is now 2.90% ... This will capture the majority of the next earnings season along with another batch of economic data.Source: Goldman Sachs FICC and Equities as of 22Mar24. Past performance is not indicative offuture results.
  9. Thematic Baskets and Macro ObservationsLouis Millerlouis.miller@gs.comFaris Mouradfaris.mourad@gs.comGuillaume Soriaguillaume.soria @gs.comJulia Maschjulia.masch@gs.com[GSX] Almost done with Q1: What's working and what's not?Please reach out for more information on any of these themes. This email is not meant to be exhaustive.What’s Not Working?The US equity market started the year with 6 rate cuts priced in for 2024. Our GS research team now assumes half or slightly lessthan that. Interest rate sensitive areas of the market are trading terribly and have had no impulse. We have higher confidence that a lower 10yr yield and a clearer cutting cycle could change that. In the meantime, the status quo of relatively high rates,or delaying rate cuts every other month, will likely lead to more of the same.12m laggards(GSCBLMOM),High floating rate debt(GSXUHIFL),Most shorted stocks(GSCBMSAL), andLow quality(GSXUMFQS) were pricing in a recession for the last two years and continue to underperform the market even though recession fears are lowest they’ve been since Covid.Non profitable tech(GSXUNPTC) andLow profit Russell 2000(GSCBNPR2) continue to feel pressure of rates higher for longer.Diversified commercial real estate(GSFINCRE) never fully rebounded after the brief banking crisis we saw last year.IRA beneficiaries(GSXUIRAB) andRenewables(GSXURNEW) never fully priced in fiscal policies.Expensive defensives(GSXUEDEF) continue to be very expensive.What’s working?Thematic areas of the market have been trading quite well. We think the opportunities across the artificial intelligence ecosystem, onshoring and infrastructure trends, obesity drugs, and aerospace are exceptional, maybe the best we’ve seen since the depths of Covid. Contrast that to the range-bound choppy rate market, and trendless small cap indices. Multi-year secular thematics have proved to be durable and agnostic to the economy, making it a great time to focus here because if there is any momentum wobble due to a shift in the cutting cycle, we would consider it an opportunity to buy these themes.Power up America(GSENEPOW, recently rebalanced –see details below) andData centers equipment(GSTMTDAT) are second derivative winners to AI whileMega-cap tech(GSTMTMEG) continues to lead the trend.Copper(GSXGCOPP) is showing signs of AI exposure considering it is an essential material to produce power.Onshoring(GSXUSHOR) andInfrastructure(GSXUINFS) are considered our most stable long-term themes because of their exposures to multiple trends: overlapping Republican and Democratic policy focus, onshoring trends, and AI’s ecosystem.GLP-1 winners(GSHLCBMI) continue to grow market share and show no signs of hitting their potential yet.Capex beneficiaries(GSXUCAPX) are showing signs of a healthy economy.HF VIP(GSTHHVIP) are doing well.High free cash flow(GSXUFCFH) andHigh growth high margin(GSCBHGHM) continue to show signs that investors feel more comfortable with a quality tilt.What we’re watching?Refiners(GSENREFS) seem to be the leading energy industry benefiting from oil futures up ytd.Small Cap Quality(GSCBSMQB) is not a space we are keen on relative to other themes but they are locally interesting relative to the market.US Elections(GSP24REP)will soon come into focus and we expect it to be a major market event. The desk has already begun fielding questions regarding trade implementations in a scenario where Republicans win the White House, Senate, and the House, or in a Trump victory but divided Congress scenario. Our GSeconomicsteam has argued that a Trump-led Republican sweep could provide a boost to the US Dollar and to bond yields. Prediction market probabilities of a Trump presidency rose after the Iowa and New Hampshire results, and market shifts around those event may provide clues to the election’s footprint.According to ourPrime Brokeragedesk, we have seen net buying in the Republican Policy Outperformer basket (GS24REPL) and net selling in our Republican Policy Underperformers basket (GS24REPS) year-to-date. See our European desk’sTariff-sensitive baskets.
  10. European Defense(GSSBDEFE) has outperformed AI year-to-date.Most of that performance was a function of 1/ Trump NATO rhetoric, 2/ Red Sea disruptions, 3/ Ukraine. Past year strong performance has largely been driven by strong equipment demand in Europe for what our economists think it will be the strongest expansion in European defence spending since the 1980.Visuals –What’s not working?High floating rate debt (GSXUHIFL) vs S&P 500 excluding the top 7 names:Source:Goldman Sachs FICC & Equities, Bloomberg, as of March 2024. Past performance is not indicative of future results.Diversified commercial real estate (GSFINCRE) vs S&P 500 excluding the top 7 names:Source:Goldman Sachs FICC & Equities, Bloomberg, as of March 2024. Past performance is not indicative of future results.IRA beneficiaries (GSXUIRAB) vs S&P 500 excluding the top 7 names:Source:Goldman Sachs FICC & Equities, Bloomberg, as of March 2024. Past performance is not indicative of future results.
  11. Renewables (GSXURNEW) vs S&P 500 excluding the top 7 names:Source:Goldman Sachs FICC & Equities, Bloomberg, as of March 2024. Past performance is not indicative of future results.Visuals –What’s Working?Power up America (GSENEPOW) vs US Power hedge (GSENEPWH):*ChatGPT LaunchSource:Goldman Sachs FICC & Equities, Bloomberg, as of March 2024. Past performance is not indicative of future results.We recently rebalance GSENEPOW based on client feedback to reflect 30% smart-grid companies, 25% power-generating raw materials, 25% unregulated utilities, and 20% other utilities that we perceive to be most exposed to the rising demand of power.
  12. Source:Goldman Sachs FICC & Equities, Bloomberg, as of March 2024. Past performance is not indicative of future results.Data centers equipment (GSTMTDAT) vs Technology with little to no exposure to AI (GSTMTLCX):*ChatGPT LaunchSource:Goldman Sachs FICC & Equities, Bloomberg, as of March 2024. Past performance is not indicative of future results.Copper (GSXGCOPP) vs S&P 500 excluding the top 7 names:Source:Goldman Sachs FICC & Equities, Bloomberg, as of March 2024. Past performance is not indicative of future results.Onshoring (GSXUSHOR) vs Offshore (GSXUOFFS)Source:Goldman Sachs FICC & Equities, Bloomberg, as of March 2024. Past performance is not indicative of future results.
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