Financial analyst Scott Rubner anticipates a strong year-end rally for U.S. equities, with the S&P 500 index potentially exceeding his 6,000-point target. Rubner highlights that historical data since 1928 shows an average 4% increase for the S&P 500 between October 27 and the year-end. This seasonal trend, coupled with a post-election rally often seen in election years, forms the cornerstone of his optimistic forecast.
Rubner cautions that the bullish trend is likely to follow a period of volatility in the coming weeks due to supply-demand mismatches. His analysis indicates that supply will surpass demand, causing temporary market downturns. However, this turbulence is expected to subside, paving the way for a stronger market by the end of the year.
This view is reinforced by recent data showing a significant drop in S&P 500's Gamma, which allows for more market fluctuations. Rubner points out that market makers no longer need to buy dips to maintain neutral positions, contributing to current market volatility.
Another factor influencing Rubner's forecast is the resumption of corporate stock buybacks after October 25, following a silent period. Corporate buybacks have authorized nearly $974 billion this year, with the highest execution rates typically occurring in November and December. The end of this silent period is likely to bolster the demand for U.S. equities.
Additionally, many mutual funds face fiscal year-end deadlines around October 31, affecting market behavior. Rubner's report highlights that 756 mutual funds managing $1.853 trillion in assets have fiscal year-ends at this time, making it a critical period for market adjustments.
The upcoming earnings season will also be pivotal, with companies representing 61% of the S&P 500's market cap releasing their reports before the U.S. election. Expectations are particularly high for major tech companies such as Apple (AAPL, Financial), Microsoft, NVIDIA, Alphabet, Amazon, Meta, and Tesla.
Rubner remains bullish on the Chinese stock market, noting unprecedented daily demand for Chinese equities. He reiterates that "this time is different" for China, suggesting a stable investment environment.
