US_Equities_Weekly_Rundown_5-3-24pdf
US_Equities_Weekly_Rundown_5-3-24pdf
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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, andto the extent it would otherwise be subject to, CFTC Regulations 1.71 and 23.605.Global Banking & Markets May3, 2024US EquitiesWeekly RundownPositioning, Flows, and Observations Across the FloorPortfolio Manager’sSummaryUS stocks traded broadly higher on Friday with the S&P 500gaining +0.5% on the week, as investors digesta plethoraof macro and micro catalysts andawait further evidenceonthe pathofUS inflation.Most Short,China ADRs, andRenewablesoutperformed on the week, whileBitcoin Sensitive, Commodity Sensitive, and Expensive Softwarestocks underperformed.Prime:HFs net bought US equitiesfor a 3rdstraight weekbut at a slower pace, ledby short covers in Macro Products (largest in 5 months). 7 of 11 US sectors were net bought on the week, led by Consumer Disc, Health Care,Industrials, and Info Tech, while Comm Svcs saw elevatednet selling as managers reduced net exposuretothe sector post several megacap tech EPSlast week.SharesSales Trading:This week was filled with a heavy dose of micro(earnings)and macro catalysts.Tuesday's hawkish ECI print caused a selloff, but Wednesday's FOMC instilled confidence thatthe Fed will keep rate hikes off the table. Micro catalysts also played an importantrole on the market direction with AAPL being the most glaring contributor(strong earnings + large buyback announcement). From a flows perspective, LOs finished the week as net buyers while HFswere net sellers on the desk. Nearly all sectorswere net bought on the week (sans Health Care), led by ETFs, Financials,Staples, and Industrials. Futures Sales Trading/Strats:Non-dealer US dollar length is near 5-yr highs, net long again for the first time since before the pandemic–the positioning theme is broad-based against individual crosses, as non-dealer contract length in each of the EUR, GBP, CHF, JPY, AUD and CAD is at or near its 1-yr lows against the USD.In equities, we estimate the CTA/trend following community sold $48bn globally(~$20bn in S&P)of their long length in the past month. Coming into Friday, we forecasta modest $18bn global buyingover the nextweek, which may be fortified or grow somewhat further if the positive price action continues.Derivatives Sales Trading: The technical dynamics have shifted from the beginning ofApril to the start of May. The sell impulse from CTAs is gone, gamma has flipped from long to short (and the cushion is now on the top side), and buybacks are coming out of blackout. Short-dated implied vols have compressed from their mid-April highs despite a lot of chop under the hood.Baskets& Themes:The desk is getting bearish onconsumer and our soft-landing basket(GSXUSOFL). We think it’s the most vulnerable area of cyclicality, cyclicals/defensives ispriced very optimistically,and we are starting to see a defensive rotation.GSXUCOND is our diversified consumer basket that doesn't' have TSLA/AMZN like the XLY ETF, and GSXURETL is our diversified retail basket that doesn't have Internet retail names that tend to trade differently. Separately, on Wednesday the team hosted a webinar to discuss managing factor exposure with GS Barra Indiceswhich werelaunched using a systematic rule base approach.Sector Specialists:Fundamental updates on Consumers this week were not unanimousbut did not tell a great story, with misses at YUM, MCD, SBUX, EL, CZR and others. If there is any silver lining, it’s that the names that have missed were in fact expected to report challengednumbers,so it’s not a total shock to investors. The magnitude is just a bit worse, and there’s also a difference in talking about these household names having weak trends and then seeing them actually reporting misses and cutting #’s.What We Are Readingand Listening toThis WeekGlobal Strategy Paper: Yielding to pressure; How higher bond yields impact equities(link)Interconnected Realities: The War in the Middle East(link)GS Exchanges: Why Treasury auctions —and rising deficits —are becoming a focal point for markets and investors(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 3-May-24. Past performance is not indicative of future results.S&P 500Nasdaq 100Russell 2000STOXX 600Nikkei 225CSI 300SPX 1-M Realized CorrelationVIX10Y USTUS DollarWTI FutureGold FutureBitcoinLevel5,127.7917,890.792,035.72505.5338,236.073,604.3921.4%13.494.51%105.0778.002,310.5062,928.88WoW Chg0.5%1.0%1.7%-0.5%0.8%0.6%0.2 pp-10.2%-0.16 pp-0.8%-7.0%-1.0%-1.6%YTD Chg7.5%6.3%0.4%5.5%14.3%5.1%4.4 pp8.4%0.63 pp3.7%8.9%11.5%50.1%BasketTickerWoW Price ChgYTD Price ChgBasketTickerWoW Price ChgYTD Price ChgMost Short RollingGSCBMSAL8.57%3.33%China vs US InternetGSPRUCIT4.98%1.59%Liquid Most ShortGSXUMSAL7.79%2.38%AI Beneficiaries vs At RiskGSPUARTI2.94%35.46%China ADRsGSXUCADR6.45%3.97%Strong vs Weak Balance SheetGSPRLEVR1.91%8.57%RenewablesGSXURNEW5.81%-8.58%GARP vs Expensive SoftwareGSPUSOFT1.80%-1.74%Power Up AmericaGSENEPOW3.08%31.59%China vs US Sales ExposureGSPRCHSL1.41%-2.16%BasketTickerWoW Price ChgYTD Price ChgBasketTickerWoW Price ChgYTD Price ChgBitcoin Sensitive EquitiesGSCBBTC1-7.24%22.02%HF VIP vs Most ShortGSPRHVMS-7.01%8.38%AI-at-RiskGSTMTAIR-3.57%-11.53%High vs Low Free Cash FlowGSPUFCFP-2.50%8.08%Commodity SensitiveGSXUCOMO-2.74%6.42%Secular Growth vs Bond ProxiesGSPUSGBO-2.41%-6.40%Expensive SoftwareGSCBSF8X-2.10%-4.44%GLP-1 Exposed vs At RiskGSPUGLPP-1.79%17.13%Lending SensitiveGSXULEND-1.34%1.62%Consumer Services vs GoodsGSPUSVGD-1.78%-1.43%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 leveragefell-2.8ptsto 199.8% (98thpercentile three-year), while US Fundamental L/S Net leverageincreased+0.9pts to 56.2% (69thpercentile three-year).Aggregate US Fundamental long/short ratiorose+1.8%on the week to 1.783(41stpercentile three-year).Trading Flows: Hedge funds net bought US equities for a 3rdstraight week, driven by long buys and to a lesser extent short covers, though the pace of buying slowed notablyvs. last week (+0.5SDs 1-yearvs. +1.3 SDs last week). US Gross trading activity increased for a 14thstraight week. •Macro Products(Index and ETF combined)made up 70% of the overall net buying(+0.4SDs), driven by risk unwinds with short covers outpacinglong sales 3 to 1.Thisweek’s notional short coveringin US Macro Products was the largest in 5 months.•HFs net bought Single Stocksfor a 4thstraight week (+0.3SDs), drivenby long buysoutpacingshort sales 1.4 to 1.•7 of 11 US sectors were net bought, led in notional terms by Consumer Disc, Health Care, Industrials, and Info Tech.On theflip side, Comm Svcs, Staples, Financials, and Utilities were net soldon the week. •Following 4 straight weeks of net selling, Consumer Disc was the most net bought US sector this week, driven by long buys as well as short covers.This week’s short coveringin US Consumer Disc was the largestsince Dec ’23 –Broadline Retail, Autos, and Hotels, Restaurants& Leisure were the most net bought subsectors. Despite this week’s net buying, Consumer Disc remains the most net sold US sector on the Prime book YTD. •Comm Svcs was by far the most net sold US sector this week(-3.1 SDs), driven by long-and-short sales. Nearly all subsectors were net sold, led by Interactive Media& Svcs, Entertainment, and Media. LeverageGross %Net %L/S Ratio (MV)Current199.856.21.783WoW Chg-2.8pt0.9pt1.8%MoM Chg3.6pt3.2pt2.4%YTD Chg2.9pt3.8pt3.3%Current 1-Yr Percentile95%98%58%Current 3-Yr Percentile98%69%41%Current 5-Yr Percentile99%68%40%US Fundamental L/S (Asset Weighted)Gross Leverage (%, left) Net Leverage (%, right)US Fundamental L/S: Gross vs. Net Leverage1551601651701751801851901952002054042.54547.55052.55557.56062.56567.57072.5JulJanJulJanJulJanJulJanJulJan201920202021202220232024US Fundamental L/S: Long/Short Ratio (MV)1.61.651.71.751.81.851.91.9522.052.12.152.22.25JulJanJulJanJulJanJulJanJulJan201920202021202220232024
  3. Source for all graphs and tables: Goldman Sachs FICC, Equities, and Prime Services data as of 3-May-24. 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 2024-35%-30%-25%-20%-15%-10%-5%0%5%10%15%20%25%30%35%JanFebMarAprMay2024Single Stocks Macro Products (Index + ETF)PB Net Trading Flow By US Product (Positive Value = Buying)% of Total US Net MV at Start of 2024-12%-10%-8%-6%-4%-2%0%2%4%6%8%JanFebMarAprMay2024TMT Consumer Disc Cyclicals DefensivesPrime Book US Net Trading Flow% of Total US Net MV at Start of 2024-3.5%-3%-2.5%-2%-1.5%-1%-0.5%0%0.5%1%1.5%2%2.5%3%3.5%JanFebMarAprMay2024-3.5-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.5Standard 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.comAriana Contessaariana.contessa@gs.comThis week was filled with a heavy dose of Micro (earnings) and Macro catalysts. SPX finished +55bps, NDX +97bps, RTY +1.57%.On the macro side, Tuesday's hawkish ECI print caused a 1.5% S&P selloff, but Wednesday's FOMC instilled confidence that Powell and US Central Bankers will keep hikes off the table and continue to watch for progress on the inflation front. He also acknowledged that the past data has prolonged the timeline for cuts. Markets digested that message and took it positively. US 10yr Yields eased from a high of 4.69% Wednesday, to 4.5% on Friday.Micro catalysts also played a massive role on the market direction this week with AAPL being the most glaring contributor, +9% on the week, driven by strong earnings and the largest ever $110bn buyback announced. AMZN also put up solid AWS numbers and finished the week up close to 4%. Positive sentiment in MegaCap earningsdrove the overall group higher. Other non-mag7 positive contributors were PFE and QCOM.The macro (and some earnings) drove Most Short Rolling +8.5% on the week (See CVNA, GME, W all up 20-40% on the week). Beta Shorts (Liquid Most Short) +7.8%, Biotech +7.8%, Regional Banks +3%, RTY +1.57%. Relatively calmer middle east tensions led to a -6.5% move in crude, a -3.3% move for energy stocks. BTC finished the week -3% and Bitcoin Sensitive Stocks finished -7%. GOOGL was the only MegaCap Tech name in the red-2.7% on the week.Worst performers of the week (SPX weighted): AVGO -5%, GOOGL -2.7%, SBUX -17%, MA -4%, CVS -16%, AMD -4.3%LOs finished the week as net buyers ($1.25bn net to buy) while HFs finished better sellers ($-500m).Largest Buy Skews: ETFs, Financials, Staples, IndustrialsLargest Sell Skews: Health Car. No other Sector was net sold.Source: Goldman Sachs FICCand Equitiesdata as of 3-May-24. Past performance is not indicative of future results.35003700390041004300450047004900510053005500-90,000-80,000-70,000-60,000-50,000-40,000-30,000-20,000-10,000010,00020,000Jan-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-24Apr-24May-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.comEmily Robossonemily.robosson@gs.comNon-dealer US dollar length is near 5-yr highs, net long again for the first time since before the pandemic and 2019. This happened as Fed cuts continued to get priced out later and later: starting this year the first full cut was priced by March, and as of midweek this week, not until Nov-Dec. Meanwhile, the first fullECB cut is priced sooner than the Fed and for June-July (source Bloomberg WIRP). The positioning theme is somewhat broad-based against individual crosses, as looking under the hood at individual futures products, non-dealer contract length in each of the EUR, GBP, CHF, JPY, AUD and CAD is at or near its 1-yr lows against the USD. Regarding investment implications, sometimes investors in FX futures vis-à-vis the FX community at large can be faster/earlier to a theme, which may have more room to run. Conversely, non-consensus investors may want to fade this theme of any continued dollar strengthening if they think that positioning is overdone as one factor. Today/Friday after payrolls data the DXY index traded sharply lower before retracing some of the losses, down around 0.45% on the day at time of writing, and with the first full expected Fed cut getting pulled somewhat earlier and closer to the September meeting.In equities, we estimate the CTA/trend following community sold $48bn globally of their long length in the last one month (modest overall size that’s less than 1x std dev in our work for this community, and of which ~$20bn was S&P), before the selling rounded out and activity was relatively net flat in the last one week. For the upcoming one week, we expected a modest $18bn global buying coming into Friday, which may be fortified or grow somewhat further if the positive price action continues as the market (SPX) is up more than 1% at time of writing this morning after the payrolls and other data. We estimate the S&P short-term trend following threshold is around the 5105 area currently, and with the market back above that today at time of writing, short-term trend would be more positive again if it stayed that way and this community would come to repurchase and rejoin the medium-longer term trend following cohort (who did not have cause to sell recently in our work) in establishing long positions.
  6. Source: CFTC and Goldman Sachs FICC and Equities, Futures Strats Group as of April-May-2024. Past performance is not indicative of future resultsChart 2 uses simulated information, and the history shown uses backtesting. The simulated results are for illustrative purposes only. GS provides no assurance or guarantee that the strategy will operate or would have operated in the past in a manner consistent with the above analysis. Past performance figures are not a reliable indicator of future results. Backtesting analysis is for illustrative purposes only. GS provides no assurance or guarantee that the strategy will operate or would have operated in the past in a manner consistent with the above backtesting analysis. Backtested and/or past performance figures are not a reliable indicator of future results. Backtested data is backtested over the entire range shown.
  7. Derivatives Sales TradingErin Briggserin.brigg@gs.comBrian Garrettbrian.garrett@gs.comLee Coppersmithlee.coppersmith@gs.comCullen Morgancullen.morgan@gs.comGillianHoodgillian.hood@gs.comThe technical dynamics have largely shifted from the beginning of April to the start of May. The sell impulse from CTAs is gone (now buyers in most scenarios and length significantly reduced), gamma has flipped from long to short (and the cushion is now on the top side as opposed to the bottom side), and buybacks are coming out of blackout (and in full force h/t AAPL).The high-low range in SPX this week was 2.56% yet the SPX only managed to close +55bps. Recall the SPX straddle going in to this week was 1.5% in the face of ECI, FOMC, NFP and a full slate of megacap earnings... and we failed to realize that straddle. The close to close moves certainly don’t feel representative of the intraday gyrations. Short-dated implied vols have compressed from their mid-April highs despite a lot of chop under the hood.Source: Goldman Sachs FICC and Equitiesdata as of 3-May-24. Past performance is not indicative of future results.
  8. Source: Goldman Sachs FICC and Equitiesdata as of 3-May-24. Past performance is not indicative of future results.Source: Goldman Sachs FICC and Equitiesdata as of 3-May-24. Past performance is not indicative of future results.
  9. Source: Bloomberg, Goldman Sachs FICC and Equitiesdata as of 3-May-24. Past performance is not indicative of future results.Source: Goldman Sachs FICC and Equitiesdata as of 3-May-24. Past performance is not indicative of future results.
  10. Thematic Baskets and Macro ObservationsLouis Millerlouis.miller@gs.comFaris Mouradfaris.mourad@gs.comGuillaume Soriaguillaume.soria @gs.comJulia Maschjulia.masch@gs.comOur desk is gettingbearish on consumer and our soft landing basket. We think it’sthe most vulnerable area of cyclicality and cyclicals/defensives is priced very optimisticallyand we are starting to see a defensive rotation. Depleting savings was supposed to be fixed by real income growth, but inflation is proving to be sticky. We are getting concerned on consumer spend, and that most of our convos are still with people defending consumer and saying why these results are somehow not a read across. The names reporting the issues are just too household in nature (SBUX, YUM, EL, MCD yesterday) to brush aside, even if they were not expected to be good. GSXUCOND isour diversified consumer basket that doesn't' have TSLA/AMZN like the XLYETF, and GSXURETL is our diversified retail basket that doesn't have Internet retail names that tend to trade differently. Both baskets are liquid. Our GIR strategy team likes pairing with Industrials. We still like our onshoring and infrastructure baskets and many other secular cyclical themes.Source: Goldman Sachs FICC & Equities, Bloomberg, as of May2024. Past performance is not indicative of forward returnsSeparately, our baskets team hosted a webinar on Wednesday to discuss Managing Factor Exposure with GS Barra IndicesClickherefor a replay or scroll down for a summarized transcript below.US Factor Monitor on Bloomberg:W <GO>>>GS External(left side menu) >>GS US Factor Monitor.For access, please reach out to your sales coverage andtogs-gssu-permissioning@gs.com.
  11. Source: Goldman Sachs FICC & Equities, Bloomberg, as April 2024. Past performance is not indicative of forward returnsSummarized transcript of the Managing Factor Exposure with GS Barra Indices webinar:Factor Volatility and Gross Exposure Covid was a traumatic event, but it is interesting to note that factor vol is staying elevated:•Factor vol is elevated relative to its own history and vs index vol•HF Gross exposure is very elevatedHow do I size my hedge•Use analytical tool kit like Marquee to look at your factor loading and overlay with hedges to achieve the factor exposure you are comfortable with.•Vol weighting target•Drawdown Limit How clients are currently positioned •Momentum exposure represents 30% of our prime book, highest in 2.5 years. This was neutral in 2020.oAI and GLP-1 on the long side have been talked about a lot. oInterest rate sensitive have been driving on the short side.•Profitability ironically shows up as a short in our PB BookoThis is now at a 5yr high. Momentum and profitability have moved in tandem –this is consistent withthe delay in cutting cycle. Clients have avoided names that are less profitable and more rate sensitive.•Growth vs ValueoIn 2022 value surpassed growth briefly in our books. YTD our clients have bought growth and sold value but both factors have the same YTD performance.oDispersion within the factor –good growth and bad growth (AI vs non prof tech)•Market sensitivity is low relative to historical average, but still substantial.oHedge funds have market exposure and need to deal with market risk which impacts positioning. o
  12. Link between macro environment and factor moves•Interest Rates rates is one of the most impactful and volatile factor that impact portfolios, along with momentum and residual volatility •Macro ends up driving a lot of the factor rotations•Interest rates can be disruptive in either direction 1/ market having a risk event from a beta perspective, 2/ market having portfolio rotation perspective•Short leg of momentum has been very interest rate sensitiveoMaterial underperformance in the laggards since winter driven by higher rates. If rates go lower they could catch up and cause a momentum crashGS Barra Index Product: full details hereThis year we launched Barra indices using a systematic rule base approach. The key things to know about the product are:•You can trade each Barra factor in one line item using a long short pair•Automatic daily notionalreset to maintain dollar neutral exposure •Automatic monthly constituent rebalance to maintain factor model accuracy•Index values have no embedded cost and strictly represent the value of the underlying members.Our indices have been constructed for the best tradeoff between factor loading and correlation to the pure factor. We want all our pairs to have the highest leverage to the factor while being pure to the factor mimicking portfolio. This is emphasized in the construction methodology, where we optimized for highest loading to the factor under following constraints:•Net sector / industry skews of 2.5% to avoid adding sector risk through the hedge •Net Factor Skew (10%)•Max weight of 1% -we don’t want pair indices to move because of idiosyncratic event. Meme mania •Target $500m liquidity with no name exceeding 10% of volume, per sideMarquee Demo: Equity Pre Trade
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