Goldman Sachs: Weekly Macro commentary (01/17/2024)

1. Cash flow / Positioning

The fact pattern over the past month: At a time when share buybacks were restricted, the trading community lost a lot of length.

This is clear from looking at our PB data (significant selling in three of the past four weeks) and the CFTC futures data (where a large portion of the S&P supply outpaced the market).

This defensiveness is also reflected in sentiment measures, which appear remarkably bearish considering the broader trend (see AAII’s bull/bear index at the lowest level since late 2023, or CNN’s fear/greed in the “fear” category).

Looking ahead, my view is that this selling pressure will ease and technical factors will improve as January turns into February.

2. Trump Policy 2.0

Last month brought a heavy dose of headline roulette. Specifically, most of my client queries revolved around the spectre of rate increases.

I don't dismiss the difficulty of managing the news flow at the next stage of the game (i.e. next week). At the same time, however, I would say that the market has adopted a "half-empty" attitude in this case and is not giving much credit to aspects where there is genuine scope for optimism (e.g. deregulation).

Put another way, while headline volatility certainly won't go away anytime soon, as the first 100 days unfold I want to keep an eye on the main thing: the incoming administration will ultimately lean toward pro-growth and pro-cyclical policies.

3. US Technology

After reaching new highs in mid-December, the technology sector has been struggling lately.

At the same time, there has been a sea change in what we hear from the brightest minds in this space about the arrival of structural advancement, particularly around general AI and superintelligence.

As we head into a mega-cap gains glut at the end of the month, take a look at the symbol GSXUROBO (a basket of global companies with influence in robotics/automation/humanoids).

A related point: If robots are coming, it looks like we might need them.

4. China

Chinese stocks have started the year on the wrong foot.

More broadly, recent months have been marked by pronounced concerns about growth (as evidenced by collapsing rates and sustained currency weakness).

While the CSRC's comments on stock market stabilization were welcomed this week, barring a more significant tax change that directly supports consumption , I remain biased in thinking that international capital will NOT flow significantly into China in the near term (see gross and net exposures hovering near five-year lows).

5. Europe

As bad as the market narrative has been (and as gloomy as the political and economic backdrop may seem), the fact is that European stocks have traded quite well in early 2025.

Why? A weak currency is a favourable factor for export-oriented market sectors (this can be clearly seen in the DAX, which is trading at an all-time high).

In simpler terms, coming into this year, positioning was bearish and sentiment was worse.

Have I noticed anything about this demonstration? No. Do I think it will last? I don't think so.

6. Political volatility

When we look back at last year, we see a remarkable fact: for the first time on record, all governing parties facing elections in a developed country lost percentage of votes.

To return to the previous point, I suspect that the issue of political volatility will persist throughout the eurozone in 2025.

7. Power

One of the biggest themes of the past year (and, really, the past decade) has been the dramatic increase in energy demand. This quote from a client is apt:

“Everything we are building for the future – artificial intelligence, self-driving cars, military 2.0, humanoid robots – consumes voracious amounts of electricity. We are entering an arms race to see who can get the most energy in the shortest time (with a bonus for low-carbon energy).

The success of the world's largest companies and nations, and human progress in general, will be measured by the growth of per capita electricity consumption.”