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Stock market retreat could see CTAs sell up to $42bn in US shares

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A prolonged stock market retreat could prompt trend-following hedge funds to sell between $20bn and $42bn of US equities over the next month according to report by Reuters citing a note issued by the prime brokerage division at Goldman Sachs.

In the note, Goldman Sachs said that commodity trading advisors (CTAs), which trade systematically to benefit from big market trends, could flip “from more positive to negative” in terms of short-term trends if the S&P 500 falls back below 5.135 points, triggering equity sales.

Goldman Sachs is predicting a sell-off of around $20bn in US equities if the S&P 500 falls by 3.2% over the next month, rising to over $42bn if the index retreats further.

The S&P is down roughly 2.6% since 11 April amid stronger-than-expected US prices and sales, as well as renewed geopolitical concerns.

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