Trend following funds, known as commodity trading advisors (CTAs), are anticipated to continue selling equities over the coming month, irrespective of market price movements, according to Goldman Sachs’ trading desk.
Despite being short $31 billion in U.S. equities, CTAs remain long on $16.5 billion of global equities. This suggests that the majority of the expected selling will take place outside of the US.
Goldman Sachs’ trading desk estimates that CTAs will sell around $70 billion worth of stocks this week. In the following month, they predict sales could reach up to $98 billion, contingent on market fluctuations.
Cullen Morgan, an equity derivatives trading specialist, explains that the majority of this flow is expected to happen outside the US.
This is due to most of the selling flows for the S&P 500, Nasdaq 100, and Russell 2000 indices having already occurred, at least for CTAs. Meanwhile, volatility-based investors persist in selling US markets.
Morgan adds, "If realized, our flow forecasts should see the trend following community rebalance to about $60 billion short in global equities."
