The rotation of US stocks continues: Technology is no longer exclusive to the US, and investors are crazy about "everything else".

Goldman Sachs partner and senior trader John Flood released a report last week stating that the style of "large tech stocks being unique to the US" in the US stock market has begun to reverse, and funds are beginning to rotate towards cyclical stocks. This week, Flood released another report stating that the rotation momentum of the US stock market is increasing on Tuesday and Wednesday.

In other words, investors are scrambling for everything other than technology stocks.

So which cyclical sectors are most likely to benefit from this rotation? Flood said that most of the discussions about cyclical stocks in Goldman Sachs trading rooms are focused on the financial industry (such as PNC Insurance, REITS, alternative investments, wealth management institutions) and the energy industry (such as offshore services, exploration and production E&P, energy giants).

Flood pointed out that as the market breadth expands, short selling is now becoming more difficult. In the S&P 500 index, the last closing had 397 constituent stocks rising. The S&P has risen by 14% this year, and on average, 259 constituent stocks have risen since the beginning of the year.

From the analysis, funds with a pure long strategy still have a lot of cash on hand. Goldman Sachs trading room did not find any supply of large-cap technology stocks for sale while cyclical stocks were being bought. Pure long investment funds have not yet experienced rotation.

But rotation does exist. Data from Goldman Sachs' main brokerage business (PB) last week showed that the investment funds for MAGMA-Microsoft, Apple, Alphabet-C parent company Alphabet-C, Meta, and Amazon, the five major technology stocks, had a sharp reversal from buying to selling, and there have been six consecutive trading days of net sales.

MAGMA's net risk exposure currently accounts for 15.5% of the total net risk exposure of US stocks, which is lower than the 16.7% a week ago. The peak was reached in March 2020 at 18%.

The following figure shows the PB net buying funds of the global financial sector last week, which was higher than 98% of the level in the past five years, second only to February 2021 and October 2020. The net buying of the financial sector offset the funds flowing out of blue-chip technology stocks being sold.

At the same time, it is worth noting that the rally continues, and investors continue to flock in because they do not want to miss the rise, and the bulls are increasing. On Wednesday this week, the total trading volume of options on various exchanges was 47 million, of which the number of call options was nearly 1.5 times that of put options, the second highest gap since April last year.

With hedge funds pouring into bank stocks and selling off tech stocks, perhaps the best choice is the sector that funds have not yet touched. Flood summarized that there has been no reversal in investor sentiment towards energy in Goldman Sachs' PB data. He believes that with the leadership of mutual funds, money will soon flow into energy.

Financial blog Zerohedge believes that some energy stocks may rise further, such as ExxonMobil, which currently has an enterprise value multiple (EV/EBITDA) of 5.