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Last month, Goldman Sachs' capital flow expert Scott Rubner, who accurately predicted the pullback in US stocks at the end of this summer, forecasted that by the end of this year, the US stock market would experience a melt-up. In his recent report, Rubner further raised his bullish outlook, expecting that the S&P 500 Index would not reach 6,000 points before Halloween on November 1st, but by the end of the year, it would far exceed 6,000 points.

In the report, Rubner, who serves as a managing director of Goldman Sachs' Global Markets Division, wrote:

“Equity selling has been canceled, and the year-end rally is beginning to resonate, with clients shifting from left-tail hedging to right-tail hedging.”

“Given the so-called 'FOMU', which refers to the fear of underperformance relative to benchmark stock indices, institutional investors are now being forced into the market.”

Rubner cited data spanning over 90 years to demonstrate that US stocks tend to perform well from mid-October to the end of the year. Since 1928, the average return of the S&P 500 from October 15th to December 31st has been 5.17%, which means that by the end of this year, the S&P 500 would rise to 6,160 points based on its closing level of nearly 5,860 points this past Monday.

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For each election year since 1928, the average return of the S&P 500 from October 15th to December 31st has been even higher at 7.04%. Based on this calculation, the S&P 500 would rise to 6,270 points by the end of this year based on its closing level this past Monday.

Switching to the NASDAQ 100 Index, since 1985, the average return from October 15th to December 31st has been 12.08%. Based on this calculation, the NASDAQ 100 would rise to 22,900 points by the end of this year based on its closing level this past Monday. However, in election years since 1985, the performance of the index from October 15th to December 31st has been less than in non-election years, with an average return of 7.29%.

Since 1979, the average return of the Russell 2000 Index from October 15th to December 31st has been 7.92%. Based on this calculation, the index would rise to 2,425 points by the end of this year based on its closing level this past Monday. In election years since 1979, the average return of the index from October 15th to December 31st has been even higher, reaching 10.08%.

Rubner mentioned the winners in the seasonal year-end rally, noting that cyclical stocks tend to outperform defensive stocks in the fourth quarter each year. He also mentioned some factors affecting the market. Among them, next week will be the "Super Bowl" of this earnings season, as companies that make up about 37% of the S&P 500's market value are set to release their earnings reports.

Rubner's report stated that from a capital flow perspective, the US stock market is entering a positive trading environment. One sign of this is that the stock buyback quiet period for listed companies will end on October 25th. Listed companies, which have already become the largest buyers of US stocks this year, are set to enter the two months with the highest proportion of buybacks in a year—November and December, with an expected buyback scale of $6 billion per day. Goldman Sachs estimates that the execution scale of buybacks in November and December accounts for 21.1% of the year.Another manifestation is that before Halloween, the largest sellers of US stocks - mutual funds - are gradually exiting. Rubner's previous report mentioned that this October is the last month of the fiscal year for most mutual funds. The end of the fiscal year in October may have an adverse impact on the price trends of popular mutual funds, or has already had an adverse impact, because funds that have performed poorly year-to-date may sell off due to tax loss reporting, and funds that have performed well year-to-date may reduce their holdings or take profits.

In this report, Rubner stated that 756 mutual funds with a total asset value of $18.53 trillion all ended their fiscal year on October 31, 2024.

In addition, data since 1996 shows that US households tend to buy stocks every November, with a significant increase in the proportion of funds flowing into stock mutual funds and ETFs in November. The proportion of assets under management is second only to January and April each year, while October sees outflows.

Rubner's report stated that volatility in November will reset, which may lead to the re-leveraging of systematic strategies (volatility control) and multi-manager funds, and even some short-term speculative YOLO mentality will have positive trading performance.