CTA epic buyback in US stocks: $86 billion purchased in a single week, another $70 billion to be added in the coming week

Quantitative trend-following funds (CTA) are returning to the U.S. stock market at an unprecedented pace, becoming the main driving force behind the recent rebound in U.S. stocks. According to the latest analysis by Goldman Sachs strategist Brian Garrett, CTAs have bought as much as $86 billion worth of U.S. stocks over the past five trading days, ranking among the top five in history—one of the largest purchases ever recorded. More notably, the model developed by Goldman Sachs futures strategists shows that even if the market remains flat, CTAs will add another $70 billion in purchases over the next five trading days. Meanwhile, the S&P 500 call option skew has risen sharply, indicating that institutional funds are accelerating their follow-through buying. Historical backtesting reveals that in similar scenarios where CTA demand accelerates, the S&P 500 tends to experience short-term consolidation but shows strong mid-term performance — with an average return of +2.19% over one month and +8.18% over three months. Garrett suggests that the "stock-picking almanac" hints at short-term digestion pressure, but mid-term momentum remains strong. Short Covering Sparks Buying Surge The trigger for this round of massive CTA buying was the trend reversal in risk assets at the beginning of April. According to previous reports, CTAs amassed a large number of short positions near the market low on March 29, then faced a historic short squeeze that forced them to cover on a large scale. Goldman’s Brian Garrett notes that since risk assets bottomed out and rebounded in early April, CTA and systematic strategies’ demand patterns have been well documented, showing consistent “buy” behavior across various market scenarios. This means that regardless of market ups or downs, model-driven buy instructions will continue to be executed. The speed of global stock buying over the past week ranks among the fastest ever. The $86 billion in weekly purchases not only exemplifies the magnitude of short covering but also reflects the concentrated entry of systematic funds following a reversal in trend signals. Next Five Days: $70 Billion "Passive" Buying Yet to Enter Goldman futures strategists’ models estimate that CTAs will purchase around $70 billion more over the next five trading days in a “flat” market scenario. This figure is crucial—it means that even without new catalysts, systematic buying will continue to provide support for the market. Garrett specifically notes that CTAs typically use VWAP (volume-weighted average price) to execute purchases, which has become evident recently: even on trading days without major news, the S&P 500 still shows continuous, stable, gradual increases—a trademark of mechanical CTA buying. This “always a buyer regardless of market direction” systematic feature means that near-term downside risks are somewhat cushioned, but caution is needed if trend signals reverse again, as this may provoke a counter-move. Historical Precedent: Short-Term Volatility, Mid-Term Strength Goldman reviewed three historical cases of accelerated CTA demand to assess current market prospects. On September 16, 2019, the S&P 500 dropped by 0.71% and 0.28% over the next two weeks and one month, but rose by 6.46% after three months. On November 17, 2023, the index rose by 1.79%, 4.54%, and 10.89% over two weeks, one month, and three months, respectively. On August 26, 2024, the index fell by 2.60% in two weeks, but was up 2.29% and 7.21% after one month and three months, respectively. Taken together, the average one-month return across the three cases was +2.19%, and the average three-month return was +8.18%. Based on this, Garrett concludes: after accelerated CTA demand, the market faces short-term digestion pressure, but mid-term performance is historically strong. Beyond CTAs, broader institutional funds are also entering the market. Data from Goldman Sachs show that S&P 500 call option skew has risen sharply, tracking the rebound in risk assets. This indicates that market participants are actively positioning for upside exposure, and not just retail or systematic strategies are driving this rally. Strengthening call option skew is typically seen as a signal that institutional investors are optimistic about the future, marking a shift from defensive to offensive market sentiment. This change, combined with large-scale CTA buying, resonates and further boosts the momentum of the recent U.S. stock rally. Risk disclosure and disclaimer The market has risks; investments should be made with caution. This article does not constitute personal investment advice and has not considered the individual investment objectives, financial situation, or needs of specific users. Users should assess whether any opinions, views, or conclusions in this article are appropriate for their own circumstances. Investments made according to this article are at your own risk.