Goldman Sachs, JPM see S&P 500 hitting new highs in coming months Via Investing.com

U.S. stocks could rise over the next four weeks, Goldman Sachs strategists said Monday, citing positive technical momentum in stocks and a tailwind from corporate buybacks.

“Trading pain for stocks is higher and the bar for being bearish at the beach at a Labor Day barbecue is raised,” strategists said in a note to clients.

They note that systematic rules-based funds that follow trends have moved from $450 billion in July to $250 billion today and are in the process of re-leveraging. Moreover, Goldman also pointed to the potential for a “green sweep” for commodity trading advisors (CTAs), which could lead to significant buying activity in the stock market regardless of market direction.

The analysis predicts that in a stable or rising market, about $27 billion could flow into U.S. stocks, while a falling market could still see inflows of about $22.9 billion.

In addition, there was a unwinding of put positions by volatility and volatility control target funds, as evidenced by the VIX index posting its largest 9-day volatility decline in history.

Traders are also positioned long range again. These factors are further supported by corporate demand, with purchasing power estimated at $6.62 billion per day until the corporate lock-in period ends on September 13, according to the note.

However, there is a note of caution regarding the period after September 16, as historically the second half of September has historically been the worst two-week trading period of the year.

Beyond that, strategists remain bullish on , projecting it could reach 6,000, with November and December being the key months driving growth.

Similarly, recent economic data and earnings reports bolstered JPMorgan Chase & Co.’s confidence. in a continued rally in US stocks through the end of the year.

The Wall Street bank highlighted last week’s events as reinforcing an upbeat outlook, with signs of economic expansion, positive earnings growth and expectations of more accommodative Federal Reserve policy.

“While growth appears to be weaker than when we took this position earlier this year, there is still significant upside,” JPMorgan notes, noting that the S&P 500 could set new highs followed by a strong performance in the fourth quarter .

JPMorgan analysis points to an average return of 4.2% for the benchmark US stocks in the last quarter of the year, based on data this century.

Potential risks to their bullish view include inflation data from Japan, geopolitical events affecting oil prices, the US election, changes in Federal Reserve commentary and weak seasonality.