A seasonal gain for US stocks

How SpaceX plans to take humans to Mars. # # --------------------------------------------------------------- The key takeaways today: - A seasonal gain for US stocks - Forecast Change: Two Fed cuts in 2024 instead of three - SpaceX has a plan to take humans to Mars - Demand for gold is likely to rise after the Fed cuts rates - The hegemony of the US equity market - Briefings Brainteaser: Who has been the biggest buyer of US stocks in 2024? Was this newsletter forwarded to you? [Sign up now](. --------------------------------------------------------------- Positioning and seasonals point to more gains for US stocks There are still signs that US stocks could rise from recent record highs, [according to John Flood]( who leads Americas Equities Sales Trading for Goldman Sachs Global Banking & Markets. Flood acknowledges that the S&P 500's strong year-to-date rally has mostly come on the back of rising valuations. But contrary to those who see signs of a bubble, he says that positioning has not become overly bullish. Hedge funds have been net sellers of stocks,” Flood points out, “and have picked up their shorting activity significantly in recent weeks.” Meanwhile, publicly listed companies remain an important buyer. Companies are expected to repurchase $925 billion worth of their shares this year, according to Goldman Sachs Research. Further, the $1.6 trillion that has flowed into money market funds since 2023 suggests to Flood that “there's still plenty of dry powder out there.” Turning to the short term, Flood says a seasonal pattern could point to a late April boost. “Retail investors tend to sell stocks in order to pay their tax bills — meaning we often see the market slip into Tax Day, then rally afterwards.” Flood's bottom line? “Even here at all-time highs, I'm still very constructive US equities.” --------------------------------------------------------------- Forecast Change: Two Fed cuts in 2024 instead of three US inflation ran hotter than expected last month. The March core consumer price index (CPI) rose 0.36%, which was 6 basis points above consensus expectations and matched its February pace. The year-on-year rate was unchanged at 3.8%, thwarting expectations that it would decline. Some parts of the report were not as strong, according to Goldman Sachs Research: For example, primary rent inflation slowed somewhat, for example. However, the strength in car repair and apparel prices will boost personal consumption expenditures (PCE) prices. Our economists now forecast the US Federal Reserve to cut rates in July instead of June. They still expect cuts at a quarterly pace after that, which now implies two cuts in 2024 (in July and November). --------------------------------------------------------------- Why SpaceX needs a reusable Starship for Mars Gwynne Shotwell (R) of SpaceX and Susie Scher of Goldman Sachs Imagine if every time we used an airplane, we had to discard most of it. That's what travel by rocketship has been for decades: a one-way trip. SpaceX is looking to change that. For a start, it figured out how to reuse the first stage of its Falcon 9 rocket, which went on roughly 100 space flights last year. Now it's focused on the next evolution with its Starship project, which will reuse both the first and the second stages, enabling the entire vehicle stack to return from a mission, be refilled with propellants, and launch again the same day. “That evolution is critical to moving humans to other planets,” Gwynne Shotwell, SpaceX's chief operating officer, [says in a Goldman Sachs Talks session]( with Susie Scher, chair of the global financing group in Goldman Sachs' Global Banking & Markets division. Shotwell predicts we will land humans on the surface of Mars in a decade and revisit the moon again sooner than that. Watch [the full Talks interview]( for other insights from Shotwell, including how her engineering background contributes to her role as COO and what it takes to succeed at SpaceX. --------------------------------------------------------------- Gold prices may have room to move higher Gold prices have been strong in 2024, rising above $2,300 per troy ounce to hit nominal record highs. Goldman Sachs Research believes prices could rise further, driven in part by the expectation of the Federal Reserve's rate cuts. So far in this bull cycle, gold ETF purchases have remained slow, but this is because ETF holdings were already high on the back of “safe-haven” purchases made during recent moments of economic uncertainty, such as the pandemic, the Russia-Ukraine conflict, and the collapse of Silicon Valley Bank. But this is likely to change. “Our analysis has shown that ETF holdings have historically seen positive buying momentum from Fed easing,” analysts Nicholas Snowdon and Lavinia Forcellese write. "In addition, we would note that gold continues to hold value as a geopolitical hedge to ongoing issues in the Middle East, Ukraine and with emerging significance in the US election cycle." They also expect “persistent headwinds in China's property sector” to underpin continued retail demand for gold in that country. In case you missed it: Read [our previous article]( about Goldman Sachs Research's forecast for gold in 2024 --------------------------------------------------------------- Dominant stocks rarely remain the best-performing stocks The US stock market has consistently been the world's biggest over the past 50 years, but its share has been steadily climbing in the aftermath of the global financial crisis (GFC). It now [comprises around 45% of the global equity market]( compared with about 30% in 2009. The longer-term rise in the relative size of the US equity market has reflected the strength of the US economy. But its dominance has accelerated dramatically since the GFC, outstripping increases in market capitalization in Asia and Europe. Relative to GDP, the US share of equity market capitalization has risen steadily as well, though part of this reflects the fact that many non-US companies are now in the US stock market. “Market dominance is not unprecedented and is only a problem if it is not supported by fundamentals,” Peter Oppenheimer, chief global equity strategist and head of macro research in Europe for Goldman Sachs Research, writes in the team's report. “That said, at the stock level in particular, dominant companies rarely stay the best performers over long periods of time.” --------------------------------------------------------------- Briefings Brainteaser: An appetite for US stocks Goldman Sachs Research recently updated its flow of funds forecasts for US stocks. Since 2000, which group has been the biggest net buyer of equities? A) US pension plans B) US households C) US companies D) Foreign investors [Check the answer here](. --------------------------------------------------------------- Goldman Sachs in the news By clicking on these links, you will redirected to external websites that Goldman Sachs does not own or operate. Goldman Sachs is not responsible for the products, services, or content provided on those sites. Please refer to each external website's terms, privacy and security policies for details. [CNBC]( April 4 [The Fed's pivot can provide an opportunity for investors to diversify: Goldman Sachs' Ashish Shah (7:26)]( [Bloomberg]( April 9 Goldman Sachs sees back-to-back ECB rate cuts from June (2:44) --------------------------------------------------------------- --------------------------------------------------------------- Some of the images used in this newsletter are sourced via Getty Images. 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