Alert: US Stock Market Pullback

This past Wednesday, the S&P 500 index achieved a remarkable feat—hitting a new all-time high amid a strong bullish trend that has seen it gain over 20% for two consecutive yearsOrdinarily, such a performance would incite a wave of euphoria across the financial markets, yet heavyweight institutions like Goldman Sachs and Citigroup are ringing alarm bellsThey caution that the momentum behind the recent surge in U.S. equities could soon come to a halt, potentially leading to a correction phase.

Despite looming uncertainties surrounding U.S. trade tariffs and a cloudy clarity regarding the Federal Reserve's interest rate path, which have rendered investors cautious, the American stock market demonstrated astonishing resilience this WednesdayAs companies began to release earnings in the quarterly reporting season, many exceeded market expectations; this stellar performance fueled investor confidence in the profitability of U.S. corporationsCoupled with strong capital inflows from investors, the stock market thrust forward with the S&P 500 index breaking through several obstacles to set new heights.

However, Scott Rubner, a managing director and strategist at Goldman Sachs, sees the situation differently

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He expressed on Thursday that as the inflow of funds from both retail and institutional investors wanes, a downturn in the U.S. stock market is highly probableIn his report, Rubner made a bold prediction: “Starting next Monday, there will be a significant shift in fund flow dynamics, and I am monitoring for a potential pullback.”

Since the beginning of the year, retail investors have flocked to the U.S. stock market at an unprecedented rate, creating a buzz in financial circlesThese retail investors, driven by a yearning for wealth, have played an essential role in propelling stock prices upwardNonetheless, Rubner believes this vigorous momentum is expected to taper off before MarchA key reason for this anticipated slowdown is the tax season in March, during which retail investors will likely need to maintain adequate cash flow to meet tax obligationsThe deadline for filing federal taxes in the U.S. is April 15, and March serves as a crucial point for tax preparation, necessitating that retail investors manage their finances wisely, thus reducing funds likely to flow into the stock market.

Furthermore, Rubner suggests that the inflow of funds from pension funds may also “run out of steam,” influenced by seasonal trendsHe noted that January and February often see the most robust asset allocation activity from pension funds throughout the yearDuring these months, pension funds actively invest in various assets, including the stock market, to optimize returnsHowever, this trend of substantial inflow usually does not persist, and March commonly experiences a notable decline in fund inflowWhen pension fund investments decrease, the stock market would lose that critical source of financial support, severely undermining its upward motion.

Interestingly, systematic funds that track trends are also displaying bearish positions

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