For nearly a month, almost every positioning indicator tracked by Goldman Sachs has been sending the same message: no one wants to hold this market.

Hedge fund conviction has fallen to levels seen around "Liberation Day" (April 2), even as the S&P 500 hovers near record highs. Last week, funds sold tech stocks at the fastest pace in seven weeks, and VIX call options are priced more expensively than S&P puts. Fear is everywhere, yet the index itself has barely budged.

However, Goldman Sachs' flows team noted in its latest report "Witching Hour" that what makes the market uncomfortable may precisely be the entry signal. "With sentiment this depressed and the macro outlook this uncertain, it is unsettling to start looking ahead. But the technicals for US equities are changing, and that is hard to deny."

The bank believes three major sources of buying power are about to return in concentrated fashion: the corporate buyback window will reopen on a large scale from late October through November, retail inflows historically persist through November-December, and foreign investors have a historical pattern of buying after midterm elections.

Buyback Window Reopens, November Is the Second-Biggest Buying Month of the Year

Corporate buybacks are the first force set to return.

Around September 15, roughly 40% of S&P 500 constituents entered their pre-earnings quiet period, and the corporate buyback window closed accordingly. Data shows that during the quiet period, buyback execution volume was only 0.8 times the level of the same period last year.

That window is now reopening. Goldman Sachs expects companies to exit the quiet period within one to two days after reporting earnings — by this weekend, about 10% of S&P constituents will re-enter the open window, and that proportion will rise to 48% by the end of October.

The bigger buying wave comes in November. Data shows November is the second-highest month of the year for corporate buyback execution, accounting for 10.1% of total annual buybacks, second only to August.

However, there is clear divergence in buyback composition. The information technology sector still accounts for 46% of all buyback execution, but that is down 40% year-over-year; the financials sector is up 88% year-over-year; energy and utilities show the most dramatic increases at +480% and +538% respectively, though together they account for only 6% of the total.

The bank interprets this as tech companies sitting on large cash piles but directing more of it toward GPUs and data centers rather than buying back their own shares.

After Halloween, Mutual Fund Selling Pressure Disappears

Alongside the return of buybacks, one source of selling pressure is fading.

The bank calls late October the "scary selling season": 678 active funds (managing $2.306 trillion in assets) and 81 passive funds (managing $1.736 trillion in assets) have an October 31 fiscal year-end, representing 23% of total active fund assets — the largest single-month share of the year.

This means tax-driven selling of year-to-date losers will concentrate around Halloween, but once the calendar turns, that supply pressure vanishes immediately.

Retail flows align closely with this timing. The bank notes that October is the third-biggest month for net outflows from equity mutual funds and ETFs, with "some hard bones still to chew"; but November and December will see consecutive net inflows, second only to February-March in magnitude.

The latest data (for the week ending October 7) shows global equity funds saw $12 billion in net inflows, with tech funds attracting the most, followed by utility funds.

Money on the sidelines is equally notable.

For the week ending October 7, money market funds saw $166.37 billion in single-week net inflows, representing 1.49% of total money fund assets, compared to an average weekly change of just -0.03% over the prior four weeks. Goldman Sachs commented:

Capital remains cautious and lacking conviction, with a highly uncertain macro backdrop. Once the situation becomes clearer, there is substantial money on the sidelines waiting to enter — and November-December is historically the window when this money flows back.

Foreign Investors: The Overlooked 18%, Historical Buying After Midterms

Goldman Sachs' sentiment composite indicator (integrating institutional, retail, and foreign investor positioning) currently reads -1.3. Historical data shows that when the indicator is in the -1 to -1.5 range, the average return over the next month is +2%, constituting a "mild tailwind."

Notably, CFTC futures positioning is at the 95th percentile, while active equity fund flows are only in the single-digit percentile, putting the composite indicator near the 10th percentile — futures longs are fully loaded, while fund flows are nearly zeroed out.

Foreign investors are the most underappreciated variable. They hold 18% of US corporate equity, far more than hedge funds' 2%, yet their positioning has languished below the 50th percentile since 2009.

Historical patterns show that foreign investors engage in systematic buying after midterm elections, with inflows over six months amounting to roughly 1.75% of their AUM. Goldman Sachs examined all 10 midterm elections since 1986, finding that buying is virtually nonexistent before the election but rises almost vertically afterward, continuing through the following spring.

Based on this calculation: 1.75% multiplied by the 18% ownership share, then multiplied by the over $60 trillion US equity market capitalization, yields roughly $190 billion in foreign buying over six months. Goldman Sachs characterizes this as a "marginal buyer" that appears precisely when the market is "looking for the next batch of incremental buyers."

The bank notes that Citadel strategist Scott Rubner had also turned bullish based on the judgment that "buyers are about to return," highly consistent with the calendar logic of Goldman Sachs' flows team.

CTA: Buyers on Both Ends of Bonds, Downside Risk for S&P Is Asymmetric

The positioning structure of systematic strategy funds (CTAs) presents another picture.

The bank estimates that a 2-sigma rise in bonds would trigger about $37 billion in CTA buying, while a 2-sigma fall in bonds would trigger about $23 billion in buying; but the S&P 500 is entirely different — a 2-sigma rise triggers only about $5.5 billion in buying, while a 2-sigma fall triggers about $45 billion in selling.

The good news is that CTAs have already sold about $81 billion in global equities over the past month, and their current US equity positioning is only at the 27th percentile on a one-year lookback, leaving room to add. In small caps, CTA short positioning in Russell 2000 has reached its highest since 2023, which could serve as potential fuel if the market rotates.

Volatility Already Priced In

Historically, volatility typically compresses notably after midterm elections, then gradually declines toward year-end.

But this year, that "compression" has already happened ahead of schedule. With about a month to go before voting day, the S&P 500 one-month implied volatility is around 12, compared to a historical midterm average of nearly 19-20 at the same point; Nasdaq 100 is around 17-18, versus a historical average in the mid-20s.

The conclusion: the options market is pricing historically tiny intraday ranges, reflecting a lack of conviction in any direction, "causing tail risk to be mispriced." Nomura's Charlie McElligott reached the same conclusion last week, noting that index volatility is at the 2nd percentile and implied correlation at the 1.8th percentile, with "the market's only fear being the right tail."

Goldman Sachs Is Not Monolithic Internally

Of course, there is disagreement within Goldman Sachs.

Louis Miller, head of Goldman Sachs' custom equity baskets, warned on October 4 that "with midterms approaching, the outcome could be negative for risk assets," and maintained a bullish view on AI-related stocks' outperformance relative to the SPXXAI basket — the opposite direction from the flows team's rotation logic.

Bank of America's Michael Hartnett offered a concise midterm election map: Republican control of the Senate and Democratic control of the House means "political gridlock = Goldilocks," with stocks gaining over 5%; a Democratic sweep means stocks falling about 10%. Prediction markets currently assign about a 65% probability to a Democratic sweep, which means foreign investors' post-election buying may first have to absorb a policy shock.