'Boy, that escalated quickly.' Goldman strategist says stock market could fall further

Dow Jones2024-09-05

MW 'Boy, that escalated quickly.' Goldman strategist says stock market could fall further

By Louis Goss

Investors are already working to shield themselves against an anticipated September correction which could start as early as this Friday if U.S. payrolls data comes in weak, Goldman Sachs technical strategist Scott Rubner has said.

The last two weeks of September is historically the worst two-week trading period for the S&P 500 index of the year, with the past four Septembers having seen particularly sharp corrections in the Nasdaq too, Rubner said in a note.

The S&P 500 SPX ended Wednesday with its second loss in a row, and the index decline of 2.3% over the last two days is its worst stretch since early August.

Goldman Sachs' clients are now already making their moves to protect themselves against an anticipated September slump, instead of waiting until the middle of the month when the 'back-to-school correction' has traditionally started, the technical strategist said.

He explained that trading styles have now started "moving faster" since the unwinding of the Japanese yen carry trade on Aug. 5, in a shift that has seen the September correction thesis "start to get pre-traded by market participants."

"I was pinged more times in the past 48 hours asking for technical market updates than I have all year," Rubner said.

"We are seeing clients get ahead of negative market technicals sooner rather than waiting for mid-month. A market correction may start to get traction if payrolls are weak on Friday," the Goldman Sachs' managing director added.

In explaining the point to Goldman Sachs' colleagues on his morning call, Rubner took a quote from the 2004 satirical comedy film 'Anchorman: The Legend of Ron Burgundy,' which tells the story of journalists working at a San Diego TV news station in the 1970s.

"Boy, that escalated quickly... I mean, that really got out of hand fast," anchorman Ron Burgundy says to sportscaster Champ Kind in the wake of a violent midday brawl with the rival KQHS Channel 9 Evening News Team.

"It jumped up a notch," the cowboy hat wearing sports reporter, Champion 'Champ' Kind, responds, to which Ron Burgundy says: "It did, didn't it?"

In Rubner's view, the brawl is now just about to kick off, with corporates about to enter a blackout period that will block them from boosting markets through corporate buybacks and pension funds reducing exposure risks ahead of the election.

Wall Street investors, including hedge funds, also entered September with higher exposure to U.S. stocks than in any of the last six election cycles, since Republican candidate George H. W. Bush won the elections in 1988.

The Bureau of Labor Statistics publication of its August non-farm payroll data at 8:30 am eastern time this Friday could mark the start of this correction period, if it shows signs of weakness in the U.S. economy, Rubner said.

-Louis Goss

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(END) Dow Jones Newswires

September 05, 2024 06:17 ET (10:17 GMT)

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