Risk Premium

The Seven Questions Goldman's Clients Have About "Rational Exuberance"

While most of Goldman's clients agree with the firm's bullish 2018 S&P forecast - of course they do: it is Goldman's job to tell them what they want to hear - they have questioned several of David Kostin "Rational Exuberance" views. Below the bank addresses the seven most common investor questions.

Bill Blain: "Something Has Changed"

"Something has changed. The downside feedback loop hasn’t functioned through 2017. Instead a new behavioural paradigm shift occurred. Investors now believe negatives don’t impact growth and that market upside is unlimited."

Deutsche Bank Explains The Five Biggest "Market Conundrums"

Deutsche Bank has highlighted the five most upsetting conundrums about the equity market, and proposes its explanations for them. The reason: "rationally explaining recent market moves will be essential to forecasting next year's market."

"OPEC's Quagmire": Goldman Is Very Worried The Cartel Is About To Blow This Meeting

"With the rhetoric not matching the logic for the first time in years, we believe that the outcome of this meeting is much more uncertain than usual... We view risks to oil prices as skewed to the downside this week as we believe that current prices, timespreads and positioning already reflect a high probability of a nine month extension."

Get Out Now: SocGen Predicts Market Crash, Bear Market For The S&P

With little stock upside left, with the threat of rising interest rates slamming P/E multiples, with the economy in deep in late cycle, with equities trading at record valuations, with everyone short vol and just begging for a vol short squeeze, SocGen's advice is simple: get out now.

Goldman Reveals Its Top Trade Recommendations For 2018

1. Short 10-year US Treasuries; 2. Go long EUR/JPY; 3. Go long the MSCI EM stock market index; 4. Go long EUR 5-year 5-year forward inflation; 5. Go long the EMBI Global Index against short the US High Yield iBoxx Index; 6. Own diversifed, and hedged, Asian growth: Long INR, IDR, KRW vs. short SGD and JPY. 7. Go long global growth, non-oil commodity beta: long BRL, CLP, PEN vs. short USD.

Goldman's Top Strategist Reveals The Two Biggest Risks To The Market Today

"We’ve also seen a growing allocation of retail and institutional money into “premium chasing” quant strategies, including, for example, ETFs that sell equity vol. I think many of these developments are positive, but the associated market structure remains largely untested. So I would not rule out the risk of a glitch that triggers, say, a 5-10% correction."

Did Oil Markets Overreact To The Saudi Purge?

The sudden turmoil in Saudi Arabia likely helped push oil prices to their highest level in two and a half years on Monday. However, the Saudi purge does not necessarily mean a change in oil policy. Saudi officials have been pushing for an extension of the OPEC cuts through the end of 2018, particularly as they prepare the IPO of Aramco.