The market is middle of the worst seasonal trends of the year, but it statistically normal, according to Goldman Sachs derivatives strategist Scott Rubner.
“I think this is a no rules market and flows over fundamentals are the drivers of price action into the end of the quarter,” Runner wrote in a note Wednesday. “This dynamic remains negative in the ultra-short term.”
But he adds the “positive set up for Q4 is about as good as I have seen once we clear this flow-of-funds supply (~1H Oct)”
“Since 1900 there have been 56 years with the SPX up more than +10% heading into Q4,” Runner said. “The market rose in 4Q in 48 of those 56 years (~86% hit rate). Across those 56 years, the median 4Q return was +5.8% and the average return was +4.6%.”
“The best 4Q return in those 56 years was +17% in 1985. The worst was -28% in 1929. The average return for all Q4s was +3.6% (~77% hit rate).”
For those looking at how high rates may weight on equities, Rubner estimates that the current commoditiy trading advisor bond short is $263.3B.