--- title: "The Driving Forces Behind the Nine-Week Rally in US Stocks: Retail Investors Stay Put, Buybacks Continue, and CTAs Keep Buying" type: "News" locale: "en" url: "https://longbridge.com/en/news/288376500.md" description: "The S&P 500 has risen for nine consecutive weeks, approaching a five-year record, yet the market is not driven by institutions. Goldman Sachs' latest data reveals that the three forces truly supporting US stocks are: resilient retail buying, robust corporate buybacks (with trading volume double that of the same period last year), and moderate accumulation by CTAs. However, underlying concerns are emerging: the upcoming buyback blackout period, potential CTA selling pressure reaching tens of billions of dollars, and the risk that negative dealer Gamma could amplify volatility. In this \"euphoric\" bull market, the turning point may be closer than expected" datetime: "2026-06-02T06:40:44.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/288376500.md) - [en](https://longbridge.com/en/news/288376500.md) - [zh-HK](https://longbridge.com/zh-HK/news/288376500.md) --- # The Driving Forces Behind the Nine-Week Rally in US Stocks: Retail Investors Stay Put, Buybacks Continue, and CTAs Keep Buying The S&P 500 has closed higher for nine consecutive weeks, with a cumulative gain of 5% in May, and is poised to extend the streak to a tenth week—which would mark the longest consecutive winning streak since 1985. Amidst mounting concerns such as geopolitical tensions, private credit risks, and the impact of AI on the labor market, US stocks continue to hit new historical highs. What is driving this momentum? Goldman Sachs' latest analysis of market fund flows and positions provides the answer: overall activity among institutional investors has been relatively quiet. The market is being supported by three key forces—**continuous buying by retail investors, full-throttle corporate buybacks, and moderate accumulation by Commodity Trading Advisors (CTAs).** Goldman Sachs data shows that these three types of buyers have paid little attention to valuation and concentration issues, forming a stable support base for the stock market. Meanwhile, the Goldman Sachs Risk Appetite Index has risen to a historic high of 1.13, while the Volatility Panic Index has fallen to near historic lows. Although market sentiment has not reached extreme euphoria, the strong willingness to go long is rare. ## Hedge Funds: Leverage Hits New Highs, But Not the Main Driver Data from Goldman Sachs Prime Brokerage shows that the total leverage ratio of hedge funds' overall books rose by 2.1 percentage points to 322.9%, reaching a five-year high; the net leverage ratio increased to 80.9%, placing it at the 85th percentile over the past year. **The net leverage ratio of fundamental long/short strategy funds surged further to 59.8%, hitting the 99th percentile over the past year.** **** In terms of trading direction, the net buying scale for global equities reached +0.7 standard deviations over the past year, with buying almost entirely driven by long position increases. North America and Emerging Markets Asia saw the largest net buying volumes. Financials, Consumer Discretionary, and Healthcare were the sectors with the most net buying, while Information Technology, Consumer Staples, and Communication Services faced net selling. Notably, the Information Technology sector experienced its largest total position reduction in over a month, primarily driven by long-side selling. However, the sector's total and net position shares in the global prime brokerage book remain near five-year highs. In Europe, risk-on inflows have occurred for five consecutive weeks, but the overall book remains net short, with new short positions exceeding long sales at a ratio of 1.5:1. Despite high leverage among hedge funds, overall institutional activity is lower than what market trends might suggest, indicating that the primary forces driving the rally come from elsewhere. ## Retail Investors: Resilient Participation, Neutral Sentiment Goldman Sachs characterizes retail fund flows as "relentlessly positive." Even though participation dipped slightly last Friday, the overall buying tendency remains unchanged. **Regarding sentiment indicators, the American Association of Individual Investors (AAII) survey for the week ending May 27 showed that the bullish proportion rose by 3.9 percentage points to 35.6%, the bearish proportion fell by 1.7 percentage points to 41.9%, and the neutral proportion dropped to 22.6%.** Compared to historical averages (bullish 37.5%, bearish 31%, neutral 31.5%), the current bearish proportion remains significantly high, keeping overall sentiment in a neutral range. The CNN Fear & Greed Index latest reading is 59/100, basically flat from last week's 58, remaining in the "Greed" zone. The Goldman Sachs US Equity Sentiment Indicator slipped slightly to +0.2 this week, also maintaining a neutral stance. This combination implies that retail investors are not in a state of irrational euphoria, but their buying behavior is continuous and stable, constituting an important bottom support for the market. ## Corporate Buybacks: Full Throttle, Led by Tech and Finance Data from the US Buyback Execution Desk shows that for the week ending May 29, 2026, **momentum in open market buyback execution continued, with trading volume reaching 1.9 times the daily average year-to-date in 2025, and 2.0 times the level of the same period in 2024, concentrated in the Technology, Financial, and Consumer Discretionary sectors.** IPO and secondary offering sizes in North America totaled $9.45 billion this week, bringing the year-to-date cumulative total to $225.54 billion, indicating limited pressure on the supply side. The Goldman Sachs Buyback Desk also noted that as the Q2 blackout period approaches (expected to start in mid-June), companies are accelerating their migration to 10b5-1 plans to ensure execution continuity during the blackout window. Currently, discretionary open market orders account for about 40% of total flow; the blackout period typically brings about a 30% decline in desk trading volume. This means that in the coming weeks, the support provided by buybacks to the market may weaken temporarily. ## CTAs: Moderate Buying, Key Trigger Levels to Watch Goldman Sachs models estimate that CTAs moderately increased their holdings in global equities over the past week. Current global equity long positions are approximately $93 billion, at the 62.3rd percentile over the past year. Looking ahead, the model predicts that CTAs will continue to buy moderately over the next 5 days and 1 month. **Specifically, in a flat market scenario, net buying is expected to reach $5.53 billion in the coming week; in a rising market scenario, net buying would be $7.25 billion; only in a falling market scenario is net selling of $260 million expected.** **** Extending to a one-month horizon, the potential selling scale in a falling scenario expands significantly to $100.4 billion, highlighting the asymmetric risk of CTA strategies—buying is moderate when following the trend, but selling pressure becomes substantial once the trend reverses. Goldman Sachs identifies key trigger levels for the S&P 500 as: short-term at 7,232, medium-term at 6,965, and long-term at 6,564. Investors should closely monitor these levels. ## Market Makers and Risk Indicators: Buffer Exists, But Is Not Impenetrable Dealer Gamma is currently positive, slightly exceeding $4 billion, providing an additional "melt-up" buffer for the market—positive Gamma means dealers tend to buy when the market falls and sell when it rises, helping to dampen volatility. However, data shows that if the market experiences a one-way fluctuation of 4%, Gamma will turn deeply negative. At that point, dealers' hedging activities will instead amplify market volatility. From a broader risk appetite perspective, the Goldman Sachs Risk Appetite Index has risen to 1.13, actually the highest level on record; meanwhile, the firm's Volatility Panic Index has dropped to 1.38, near its historic low, a significant decline from levels above 9 just a few weeks ago. The implied correlation of the S&P 500 has also fallen to historic lows, reflecting the market's extremely optimistic expectations for stock-specific diversification. ## Wall of Worry Remains, Data Window Opening Soon Despite multiple supporting forces lifting the market, Goldman Sachs warns that investors still need to navigate the existing "Wall of Worry" and intense factor volatility. Macro and micro data windows worth watching in the near term include the ISM Manufacturing and Services Indices, JOLTS Job Openings data, the Non-Farm Payrolls report, and more earnings reports from the Consumer and TMT sectors. At the mutual fund level, net inflows into global equity funds turned slightly negative for the week ending May 27 (-$7 billion, compared to +$2 billion previously). Demand for US equity funds persists, while European, Japanese, and Mainland China equity funds all saw net outflows. 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