Uddrag fra Goldman og Zerohedge:
Another Day, Another Deadline’, but this one feels more significant and less TACO-prone.
Having warned that stocks face a “tricky” 48 hours, Goldman Sachs Partner, Rich Privorotsky, notes that markets are chopping as we sit on the brink of yet another self-imposed deadline.
Negotiators, in theory, have until 8pm EST tonight before the US potentially escalates with strikes on Iranian infrastructure (Hegseth press conference cxled for this morning).
Headlines suggest talks are ongoing, with Iran reportedly coming back with its own 10-point plan.
The core sticking point still looks like control of the Strait of Hormuz…
Iran pushing for joint control (with Oman) and some form of economic tolling to support reconstruction.
Hard to see the US accepting anything that resembles Iran retaining control over the Strait.
Glass Half Full…
Talks are still happening and both sides are at least engaging via intermediaries.
My modal view is for another last minute extension rather than immediate escalation.
We’ve seen this movie a few times now… it’s getting tired, but the pattern persists.
[ZH: SpotGamma notes that the market in 0DTE space is coiled between condor-seller support and gamma resistance above, waiting for tonight’s headline. With the deadline at 8PM, we think you today use the 6,600 – 6,675 range.SPX gamma resistance has slid up from 6,600 to 6,675, with negative gamma persistent from 6,600 down to 6,450.We also note that there has been a condor seller back in the market – yesterday at 6,600 and 6,650, and today we see them back at 6,600 x 6,500.A break sound of 6,580, with large HIRO negative values could push the Index down to 6,500.]
CTAs look like buyers of both bonds and equities across any scenarios (and small sellers of crude).
Prime brokerage data still points to high gross but relatively low net… implying plenty of index hedges still sitting against long books.
Sentiment surveys remain subdued, all of which is keeping equities as an asset class quite resilient.
Glass Half Empty…
That said… molecules don’t lie.
More infra hit overnight.
Front-month crude continues to push higher.
The longer disruption persists… and the more infrastructure is impaired before normalization… the more second-order effects build.
The key question shifts for me is, in a resolution where does oil base?…
…and critically where does gasoline/diesel go…
That feeds directly into the next leg of the macro: inflation vs growth.
I have some sympathy with the H2 slowdown view… fiscal drag from BBB rolling off, layered with conflict driven spending and higher energy acting as a tax.
Political risk (including a potential Democratic sweep) also feels underpriced into H2.
All of that sits awkwardly against central banks that are constrained… unlikely to be able to cut/hiking in Europe into another supply driven inflation shock.
Watch bonds, SFRZ6 has led SPX on the upside and the downside throughout this episode and form here points slightly lower.
Traders Market
It’s been a good trader’s tape if you’ve stayed nimble… but from here it’s less obvious. We’ve had the reflexive bounce.
In a ceasefire scenario, you likely see hedges come off into what is still a supportive earnings backdrop (numbers generally drifting higher… though the fade from Samsung not exactly inspiring).
Beyond that, I still think the ceiling is defined by the same issues as before:
1.) Credit, private issues not going away + heavy issuance calendar just keeps risk capped ( that said, based on implied funding in HYG people have been aggressively putting hedges…so equally prone to squeeze risk)2.) AI where the ongoing debate around terminal values just keeps driving de-rating across verticals, and3.) the consumer which was already late cycle/risk of labor market deceleration and now facing an added energy headwind.
On Net, Privorotsky says he is broadly neutral here.
I suppose if my modal view is another can kick tonight I should be leaning a bit long but this feels like guessing.
My bias would be to buy a sharp selloff on any near-term escalation… on the view that kinetic action would quickly be followed by renewed attempts at negotiation + positioning means people will be covering hedges.
Once we’re through this phase, we can reassess whether there are bigger macro storm clouds forming.
The upshot is that, with the recent vol compression over the past week (spot VIX 24 not 31) has made optionality look more attractive again, as we detailed earlier…
Regression of Put Wing Corr Skew vs Call Wing Corr Skew – The Call wing is historically Cheap in SPX
Upside on SPX and NDX as a counter-consensus trade is arguably particularly more convex than it historically has been.
Upside on SPX and NDX as a counter-consensus trade is arguably particularly more convex than it historically has been.
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