Uddrag fra Goldman
“I’m Not Chasing Upside Here”: Goldman Delta-One Desk-Head Suggests ‘Caution’ At ‘Narrow Breakout’
New Highs
Hardware led, earnings led, industrials and cyclicals driving, with markets focused on low net positioning, CTA demand, and systematic re-risking into a right tail, soft landing backdrop.
The Iran conflict is still simmering in the background, but rhetoric is improving and there’s incremental progress toward yet another two week extension.
Interestingly, this is one of the narrowest rallies in history.
Only ~12 stocks in the SPX are at 52 week highs while the index is at 52 week highs. There have only been a handful of similar readings, mostly late 90s / early 2000s.
With no backtest and only anecdote/experience, I think this is generally bad news for momentum as laggards catch up…especially with gross as elevated as it is.
Bears Go Home
I’ve got egg on my face for fading this rally, so trying to lay out the bear case cleanly and logically. Would welcome pushback.
1.) Rates and inflation distribution has shifted. Even if the conflict ended tomorrow, refined capacity takes time to recover. Dec ’26 oil looks to be basing in the low 80s range (call it up 30% from undisturbed) and refined products are likely to be a multiple of that in the 30-50% range). In the US the path goes from cuts → holds, in Europe it goes from holds → hikes. Explains why defensives and bonds are lagging.2.) Consumer impact is non-trivial. Energy shock likely offsets a almost all of BBB driven fiscal impulse. (Seen all these luxury good names LV/Kering/Hermes misses across the board)3.) Credit. This is the most relevant technical constraint. Late cycle dynamics… private credit circularity (especially vs software)… and a huge amount of issuance needed to fund the investment cycle. Hard to see spreads tightening materially from here and they are already struggling to keep pace (see below).4.) Software / AI. It feels intellectually inconsistent to argue disruption is isolated. If terminal value is being questioned, it should impact growth multiples more broadly. Likely a structural overhang.5.) 2H 2026. Fiscal impulse peaks now. Second half brings compression and a messy political backdrop….things look best now but forward argues this is near peak.6.) Iran. I think we’ve firmly moved past this but is re-acceleration really a zero-probability tail?
Yeah, but apart from that, everything is awesome right?
Here, Privorotsky pays out the case for staying long…
Bull Case
Bull case is obvious.
1) Too many doubters (AAII Bull-Bear out overnight…dipped lower to -11)… not enough net.2) Systematic derisking flipped to chasing.3) People sold too much on the way down, now forced to re-risk at the highs.4) Multiply that across every systematic bucket.5) Layer in AI/AI capex earnings momentum… just look at TSMC numbers!5) Investment economy is in full swing…that’s how you get here.
Risk
Technicals have been perfect… expiry week, vol compression… all reinforcing upside.
Lessons learned…
1.) everything is technical in the short term… fundamentals are a crutch. And…2.) being early = being wrong.
From here…key risk is that CTA + expiry demand fades after this week.
Watching PB data for evidence of re-risking.
One clear signal… massive SPX call delta buying this week.
I’m still cautious… not chasing upside here… but waiting to see if flows exhaust and fundamentals reassert.
Flows still largely one way, though some some incremental signs of long-only supply in Europe… notably the one region not breaking to highs (still 2 hikes priced to end of year from ECB).
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