Goldman Sachs trader: As we enter December, US stocks have a "clearer starting point."

A turbulent November reset market positioning and sentiment, providing a clearer path for U.S. stocks as they enter the final month of the year. According to the latest observations from Goldman Sachs’ trading desk released on November 28, the market has shown positive signals before December, with multiple indicators—including positioning, breadth, volatility, and systematic flows—having reset. The excessive bullish sentiment toward large tech stocks has cooled, the breadth of market gains has significantly improved, and the fear index has receded, providing a “clearer starting point” for the U.S. stock market in December. November Review: Overheated Expectations and Turbulent “Style Factors” According to Goldman Sachs’ top trader Shawn Tuteja, the market held extremely high expectations for the year-end rally coming into November, with even some long-term bearish investors turning bullish. However, this overly unified bullish expectation, combined with the Fed’s hawkish stance on October 29, triggered sharp market adjustments. The report notes that these adjustments were primarily reflected in the market’s internal structure. For example, Goldman Sachs’ unprofitable tech stock index (GSXUNPTC) dropped about 23% from its peak to low, while the most heavily shorted stock basket (GSXUMSAL) fell around 29%. Another trader, Lee Coppersmith, further explained that November's real story was not about the S&P 500 index itself, but the surge in volatility among “style factors” beneath the surface. Data shows that 20-day factor volatility has risen above 20, while the S&P 500’s own volatility only moved up moderately. This means portfolios heavily tilted toward specific investment styles (such as growth vs. value stocks, or AI winners vs. other stocks) experienced much higher volatility than the market overall. Market Reset Signals: Positioning, Breadth, and Volatility All Cooling Down The report believes that after the turbulence in mid-November, the market has cleared a significant amount of pressure, with multiple indicators showing “reset” signs: - Large Tech Positioning Returns to Neutral: Previously, the market’s bullish positioning for the "Mag 7" tech giants was extremely crowded, and options market put-call skew even inverted (call options priced higher than puts). This extreme bullish positioning was swiftly reversed last week and is now back to neutral. - Market Breadth Significantly Improved: Participation in market gains is expanding. The 5-day moving average of advancing vs. declining S&P 500 stocks rebounded strongly from -150 earlier in November (indicating severe underlying damage) to the +150 range, suggesting gains are no longer limited to a few stocks but are much broader. - Volatility Panic Cooling: Goldman Sachs’ “Volatility Panic Index” has fallen from this month’s highs to 5, just above its three-year average of 4.6. Sub-indicators including implied volatility, volatility-of-volatility, and options skew have all cooled together. Systematic Selling Pressure Eases, AI Investment Themes Broaden Beyond the improvement in market sentiment and technical indicators, fund flows and evolving investment themes also provide positive signals. First, the process of systematic funds reducing risk has essentially been completed. Goldman Sachs estimates that in the past month, systematic strategy funds have sold about $16 billion of the S&P 500 index. Looking ahead, the baseline scenario for next month has shifted to moderate buying (around $4.7 billion), which means the tail risk of forced selling by systematic funds has “significantly decreased.” Second, the AI investment theme is broadening. The report points out that three years after ChatGPT’s debut, AI is finally starting to show up in corporate earnings. Many companies in “old economy” sectors are now launching concrete AI tools related to cost-cutting and profit improvement. Goldman Sachs has therefore introduced a new stock basket index (GSXUPROD Index) aimed at capturing the theme of “using AI, not selling AI,” reflecting AI’s shift from narrative to measurable productivity. The report concludes that the U.S.'s long-term advantages in intangible asset investment, allocation efficiency, and corporate scale remain intact, and that AI adoption is becoming the next structural tailwind. In summary, the release of factor turbulence, the reset in large tech positioning, improvement in market breadth, cooling of volatility, and the completion of systematic de-risking have all given the market a “clearer starting point” as it heads into December compared to a few weeks ago. Risk Warning and Disclaimer The market has risks; investment requires caution. This article does not constitute individual investment advice and does not take into account the particular investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views or conclusions in this article suit their own circumstances. Any investment made based on this is at your own risk.