Institutional Insights: Goldman Sachs Flow OF Funds 'Ebb & Flows'
The big flow pillars (what’s supportive vs what can break)
### 1) Fund flows: equities in, cash out
- Huge equity fund inflows led by US + EM: +$71bn vs +$2bn prior week (their emphasis: massive acceleration).
- Money market assets fell -$62bn, cited as 3rd largest in their dataset → cash is rotating out of sidelines.
- Sector leadership in flows: commodities, tech, financials; over 4 weeks: commodities + industrials notably strong.
**The “cash on the sidelines” trope is becoming real in their data—supportive for dips, especially if dealers/buybacks step in.
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### 2) “Sentiment” vs sentiment (a subtle but important nuance)
- GS “Sentiment Indicator” is positioning in US equities, not feelings.
- Latest read -0.2 implies investors are still somewhat skittish / not fully loaded, even as AAII sentiment is at a 1-year high.
**divergence: people say they’re bullish (survey), but positioning is not maxed (their measure). They expect this gap to collapse—which could happen via:
- positioning catching up (rally continuation), or
- sentiment cracking (headline shock / vol spike).
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### 3) Prime brokerage flows: indices/ETFs shorted, single stocks bought
- Macro products (index + ETF): biggest net selling in 4 weeks (**-1.1 SD**), entirely via short sales.
- US-listed ETF shorts down -1.1% WoW, but still +8.1% MoM; driven by covering in large-cap equity ETFs.
- Single stocks: slight net buy (**+0.2 SD**), with long buys > short sales (1.2:1).
**fits the “broadening” / stock-picker market theme: less pure index beta chasing, more micro-level selection.
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### 4) Funding spreads: leverage demand is returning
- Funding spreads bounced off lows → aligns with re-leveraging in systematic community.
**When leverage conditions ease, systematic players can add risk faster—until vol changes that.
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### 5) Systematics: the “cliff risk” is on down tapes
- Since start of year: systematics added ~$5B US equity exposure (low realized vol helped).
- Recent price action pushed CTAs to moderate sellers, but they’re close to thresholds (so regime can flip quickly).
- Their projected flows are very asymmetric:
- 1 week: flat = -$6.7B sellers; up = +$1.8B buyers; down = -$44.6B sellers
- 1 month: flat = -$15.9B; up = +$14.8B; down = -$210B sellers
**Upside adds are modest, but downside de-risking is large. That’s the mechanical reason they’re wary of “headline shock → outsized move.”
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### 6) Options gamma: calming force after a bounce
- Post selloff: dealer gamma “cleaner.”
- Dealers become max long S&P gamma about +3% from here → a rally can push the market back into a gamma pocket (i.e., dealer hedging dampens volatility).
**Near term could feel choppy until price moves into that “positive gamma cushion,” after which intraday moves tend to compress.
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### 7) Dispersion: index hedges rich vs single names (stock-picker regime)
- SPX skew vs constituents: 93rd percentile (1y) / 97th (4y).
- Single-stock 1m IV vs index: 89th (1y) / 97th (5y).
**Investors are paying up for index protection relative to single names, and/or single-name upside is being chased. This is consistent with “less explosive index rallies, more differentiated winners/losers.”
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### 8) Buybacks: blackout ending = incremental bid
- Final week of blackout.
- They expect supportive buyback flows starting next week as windows reopen.
**This is one of the most reliable “calendar tailwinds” for US equities—especially for dip support.
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### 9) RTY vs NDX: early-year small-cap burst, history mixed
- RTY has outperformed NDX by ~3% YTD; RTY outperformed SPX every day in 2026 so far (fun stat).
- Historically (8 prior cases since 1928 where RTY beat NDX by >2% early):
- Avg next 1w: NDX -1.18%, RTY -0.21% (soft)
- Avg next 1m: NDX +1.96%, RTY +3.59% (RTY tends to hold up)
- Avg next 1y: NDX +10.25%, RTY +7.11% (NDX edges longer-run average)
**Early RTY leadership doesn’t guarantee a straight line; short-term can wobble, 1-month favors RTY on average, 1-year tilts back toward NDX.
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****what “contained selloffs + relief rallies” means in practice
“The tape is supported by flows, but it’s brittle—selloffs may get bought, yet shocks can still cause violent downdrafts because systematic selling is convex.”- Expect choppiness with fast reversals: selloff → stabilizes → relief rally → calmer (if gamma turns supportive).
- Downside is the bigger risk than upside surprise because systematic selling is much larger on down tapes than buying on up tapes.
- Stock selection matters more than index beta in this regime (dispersion high, index hedges rich).
- Calendar matters: buyback windows reopening is a tangible near-term bid.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!