Stock markets could be set for a major turnaround at the end of this month, meaning investors now have an opportunity to "buy the dip" following one of the sharpest unwinds in recent history, a Goldman Sachs analyst said.
Nvidia's earnings on August 28 and the Federal Reserve's Jackson Hole Economic Symposium on August 22 and 23 could drive this rebound in the U.S. stock market, Goldman Sachs' technical strategist Scott Rubner explained in a note.
The situation will open up a short-term window during which investors will have an opportunity to "buy the dip" and take advantage of a rebound in equity prices which will see stock markets hit new highs after the U.S. elections in November, he said.
Rubner explained that markets are in the final innings of a correction period that saw a huge $109 billion worth of global equity futures sold over the last month alone in what marks "one of the largest and fastest unwinds" in recent markets history.
Goldman Sachs' futures strategies teams estimates that $80 billion worth of those global futures contracts were sold in the last week alone, in line with wider efforts among investors to cut their exposure to markets in the face of widespread volatility.
Rubner said those cuts have now overshot the mark, in a situation fueled by algorithmic traders taking a "sell first, ask questions later" approach to the sharp increase in market volatility.
As such, the publication of Nvidia's $(NVDA)$ second-quarter results and news from the meeting of central bankers at Jackson Hole in Wyoming could spark a turnaround in market sentiment from the bearishness seen in recent weeks.
The publication of the U.S. July Consumer Price Index report on Wednesday could also drive market movements, with potential for both upside and downside impacts, Rubner said.
Rubner pointed to figures from the American Association of Individual Investors' Investor Sentiment survey showing the percentage of 'bulls' has dropped by 17% over the past two weeks, in what marks the sharpest fall in bullish sentiment since the market crash in 1987.
He explained the turnaround for U.S. stocks could be fueled by corporates carrying out share buybacks during the repurchase window as he argued S&P 500 index companies will likely take advantage of the dip to carry out an estimated $4.75 billion worth of repurchases through to September 6.
Investors now have an opportunity to buy the dip ahead of the start of a tricky trading environment in September in the runup to the U.S. elections, Rubner said, and he predicted markets will hit "new highs" in the fourth quarter of the 2024.