Will 2024 end with a decline? Goldman Sachs warns: The headwinds outweigh the tailwinds in these two days

After Christmas, the U.S. stock market did not see the Santa Claus rally that investors had hoped for. On Monday, the three major U.S. stock indices collectively fell for the second consecutive trading day, with the S&P 500 index dropping more than 1% for the third time in the last eight trading days. Goldman Sachs traders warned that even on Tuesday, the last trading day of 2024, the U.S. stock market might not reverse its downward trend, as the unfavorable factors over the next two days would outweigh the favorable factors.Goldman Sachs trader and Managing Director Nelson Armbrust listed several bearish reasons in a report on Monday, noting that his preferred trade is to "buy put spreads to hedge the length of the portfolio close to tomorrow (Tuesday)."The report mentioned the following key points:Gamma: On Tuesday, a large number of outstanding options contracts betting on levels around 6050 to 6070 will expire. Given this, the overall Gamma situation will be quite unstable on Tuesday. Current long positions exceed $3 billion, but a 1% increase would mean Gamma would jump to over $7 billion in long positions, while a 1% decrease would mean Gamma would remain flat at this $3 billion position.Pension Fund Rebalancing: Goldman Sachs' latest estimate for U.S. pension fund rebalancing indicates that pension funds will sell $27 million in stocks, a significant amount that exceeds 87% of past levels. The report reminds that pension funds do not have to rebalance and can choose when and how to do so. Historically, market trends show that pension funds often start a portion of their rebalancing trades one or two days in advance. Last Friday's sell-off, accompanied by rising U.S. Treasury yields, was a strong signal indicating that this rebalancing is occurring. Meanwhile, Friday's market-on-close (MOC) orders exceeding $3.9 billion also suggest that, as in the past, there may be participants trading in advance.Commodity Trading Advisors (CTA): The decline in U.S. stocks last Friday is expected to trigger more CTA selling in the coming days, although the scale is not large and is not unrelated to last Friday's drop.Liquidity: As Goldman Sachs anticipated, liquidity has significantly decreased compared to two weeks ago. The S&P's maximum book depth is currently $8.9 million, down 35% from the year-to-date average of $13.9 million.The report states that Armbrust's baseline view is: "The headwinds today and tomorrow outweigh the tailwinds, so I will buy S&P put spread options close to tomorrow's hedge portfolio length."Wall Street Journal mentioned last Friday that a major driver of the U.S. stock market's decline was that U.S. pension funds would sell $21 billion in U.S. stocks and purchase an equivalent amount in bonds before the end of the month. Before a slight sell-off last Wednesday, the rebalancing amount had reached as high as $30 billion. Based on the absolute dollar value of all buy and sell transactions over the past three years, the $21 billion in U.S. stocks to be sold ranks in the 86th percentile, meaning it is above 86% of the levels over the past three yearsIn addition, at the end of the year with no major news, data, and light trading, the 10-year U.S. Treasury yield, as an anchor for asset pricing, affects the stock market; the higher the yield, the greater the pressure on the stock market. Last Friday, the 10-year U.S. Treasury yield hovered at a seven-month high, exacerbating the downward pressure on U.S. stocks