MW Pension-fund rebalancing and other red flags that suggest a stock-market pullback is nearing, according to Goldman Sachs
By Barbara Kollmeyer
But this is also an opportunity to buy, says trader
Goldman Sachs sees the S&P 500 ending the year higher, but a pullback is coming in the near term.
Is anyone on edge after the year's ninth record close by the S&P 500 SPX last week? Goldman Sachs is, for one, as its sales team is warning clients of a pullback on the horizon.
The latest caution from John Flood, head of Americas equities execution services at Goldman, points first to hedge funds - a big source of market appetite lately - heading to the sidelines. Last week they exited short positions aimed at achieving protection from an overall market, or economic, crash, while also trimming their long positions. Last week brought the biggest overall selling of those positions - known as degrossing - in the past seven months, he said in a note to clients on Sunday.
The second warning flag is based on the massive amount of stocks that pensions are getting ready to sell. Flood said April month-end pension rebalancing points to a sell estimate of more than $25 billion in U.S. equities, which rank among the 15 biggest sales totals ever recorded, since 2000. Stripping out quarterly expirations, it's the biggest monthly sell estimate ever.
Meanwhile, CTAs - systematic funds that focus on trading futures contracts - are no longer, for the first time in a month, buyers of the S&P 500. A big buying spree means they are now holding $32 billion in net long positions in the S&P - they bought $23 billion last week and $53 billion over the past month. Flood had previously warned that CTA buying was tapering off.
His fourth red flag highlights a common complaint among segments of Wall Street - that the stock market's gains are uneven and driven by just a few companies, meaning Big Tech lately. "This tape continues to have bad breadth," said Flood. The chart shows the number of advancing versus declining stocks has narrowed sharply and how unusual that is versus history:
Finally, investor positioning is starting to look "stretched," in Flood's view. He offered this chart to put that in perspective:
His advice, nonetheless, is that any pullback "should be used as a buying opportunity," and, he said, he expects the S&P 500 to finish the year "significantly higher than current levels."
Related: Why JPMorgan is telling investors to keep buying the dips even as market hits new highs
The record stock-market run has come in spite of geopolitical tumult, and with first-quarter earnings off to a solid start, a test for the stock market will come this week with 44% of the index set to report earnings. That cohort includes tech heavyweights Alphabet $(GOOGL)$, Meta $(META)$, Amazon (AMZN) and Apple $(AAPL)$. Flood's warning clients: "Buckle up."
Read: Wall Street's Super Bowl Wednesday: Alphabet, Amazon, Microsoft and Meta report along with Powell's last Fed meeting
The PHLX Semiconductor Index SOX just logged its longest-ever winning streak of 18 sessions and closed 50% above its 200-day moving average on Friday, he noted. Friday's action marked the "most extreme dislocation above its 200-dma since the blow-off-the-top moment in 2000," when the SOX traded 100% above that marker, he said. Many Wall Street chartists see the 200-day moving average as a dividing line between longer-term uptrends and downtrends.
Those stocks have been driven by rising confidence that token consumption - AI usage units - will turn into revenue and monetization for companies in that space.
-Barbara Kollmeyer
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(END) Dow Jones Newswires
April 27, 2026 08:02 ET (12:02 GMT)
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