(Bloomberg) -- Brace for more declines in stock markets, warns Goldman Sachs Group Inc.’s tactical specialist Scott Rubner.

Answering a barrage of questions from clients on whether the pullback in stock markets meant enough equity exposure was reduced last week, Rubner said “my reply is no.” He noted that Goldman clients have been reducing exposure on any uptick in stocks. 

Goldman’s trading desk estimates that commodity trading advisers, or CTAs that surf the momentum of asset prices through long and short bets in the futures market, are modeled to sell stocks over the next week, no matter which way markets go. 

Moreover, he noted that institutional-size demand for puts and hedging now exceeds volatility selling strategies for the first time this year — a sign that big investors were rushing to prepare for more downside in stocks. That’s reflected on the VIX Index as it spiked above 20 points last week and remains well above the 2024 average.

Other reasons to be cautious in this market is poor liquidity, options positioning for dealers and a lack of retail demand for bullish calls post the US tax day on April 15. Rubner said liquidity has fallen by 66% since the start of the month as a measure of S&P 500 E-Mini Futures’ top of book.

US stocks bounced on Monday after six consecutive days of declines, with the S&P 500 Index gaining 0.9% ahead of a busy first-quarter earnings week.

--With assistance from Thyagaraju Adinarayan.

©2024 Bloomberg L.P.