Goldman Sachs Sees Equities Buying by CTA Systematic Traders to Offset Blackout in Corporate Purchases

In a recent note regarding global equities, Goldman Sachs analysts have highlighted a notable trend in systematic trading. According to their analysis, Commodity Trading Advisors (CTA) systematic traders are expected to remain net buyers of equities over the next two weeks. This trend is expected to persist regardless of market conditions, as the CTA model predicts buying activity across multiple scenarios.

CTA traders, who often use algorithmic and quantitative strategies to make investment decisions, are currently net long on equities at approximately the 65th percentile, according to Goldman Sachs.

This level indicates a significant, though not extreme, bullish positioning. Despite this strong net long exposure, Goldman Sachs anticipates that CTAs will continue purchasing equities, thereby providing support to the market.

One of the key reasons this sustained buying by CTA traders is noteworthy is that it coincides with a period of reduced corporate buying activity due to blackout periods. Corporate buybacks—one of the critical drivers of equity demand—typically pause during earnings season blackouts, when companies refrain from repurchasing their shares.

These blackout periods can result in reduced market liquidity and, in some cases, downward pressure on stock prices. However, Goldman Sachs believes the CTA buying will help offset the potential absence of corporate demand during this period.

The expected CTA buying spree is likely to have broader implications for global equities. For one, it may provide a stabilizing force during the blackout period, preventing potential selloffs or downward volatility that might otherwise occur.

Additionally, as systematic traders operate based on pre-determined models, their buying could add momentum to ongoing rallies or mitigate the impact of negative market developments in the short term.

Given that CTA traders typically adjust their positions in response to trends and volatility, the continuous buying activity across different scenarios suggests that their models are factoring in favorable market dynamics or an anticipation of further upside potential.

While this systematic buying may not be directly tied to underlying corporate fundamentals, it could still influence short-term price movements and trading volumes.

For investors, Goldman Sachs' outlook on CTA activity provides important context for navigating the market in the coming weeks. With corporate buybacks on hold, the reliance on other sources of market demand becomes more pronounced.

While CTAs' systematic strategies are not a long-term substitute for fundamental drivers like earnings growth or economic data, their role in offsetting short-term market imbalances could play a crucial role in maintaining market stability during this period.

In summary, Goldman Sachs' analysis suggests that CTA systematic traders will remain net buyers of equities in the near term, despite a temporary slowdown in corporate buybacks.

This buying activity is expected to support the broader equity market, potentially smoothing out volatility during the earnings blackout period. Investors should take this systematic activity into account as they evaluate the near-term prospects for global equities.