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Goldman Is "Bearish By A Thousand Cuts"
While many look for a specific event (PSI or NFP) to be the catalyst for the next leg up (or down), Goldman sees several factors at play that could create a 'sell-off by a thousand cuts', rather than one big flush, as macro- and micro- news impacts stocks. First, after habitually delivering better-than-expected news for much of the last several months, recent data points have not been able to best expectations. Second, cyclical weakness has coincided with oil price rises, and third, Bernanke's recent testimony was a little less unconditionally accomodative than the hoards would have liked. Decomposing US equity performance into risk-appetite, growth-expectations, and European-event-risk concerns shows two of the three rolling over and dragging on stocks since March began. With market growth views under pressure and signs of frayed data on the edges, following last week’s marginally disappointing Manufacturing ISM print, last Thursday Goldman went market neutral as in their words, they are taking 'market signals seriously'.
- Cyclical assets continue their slide, as the macro data turns murky
- After a disappointing ISM, we closed our long Russell recommendation and are now neutral
- Alongside cyclical underperformance, other disquieting shifts include …
- …headwinds from oil prices, perceptions of a less-accommodative Fed, and softer data
- Over the past month, index leadership was predominantly among defensive equities …
- … and, as a result, the gap between macro drivers and the index level has significantly widened
- Payrolls on Friday, and early March data next week may provide an opportunity to reengage
Our typical decomposition of S&P 500 performance relative to its macro drivers is another way to view this dynamic (Exhibit 7 above). From October 2011 lows through the end of February, we estimate that improving growth views accounted for 12 percentage points of the market’s nearly 18% rally. The risk contribution while sizeable, had declined sharply earlier in the year.
Since February, growth views have retreated sharply, and the market continued to be buoyed by sentiment, and not macro fundamentals. Although the market has sold off the first few days in March, the cyclical sell off continues to be much sharper. Taken literally, the ongoing rerating lower of market growth views would imply an S&P level in the 1100 range.
The gap between market growth views and the index itself reached “wides” reminiscent of 2011. Last year, we first noted the growing gap between the market’s growth view and the market in the spring. Although the Wavefront Growth basket continued to trend lower, the index itself remained range bound until August, when the two reconnected for a time.
It certainly has been worthwhile to heed the warnings beneath the index. Indeed, our recent choice to cut risk was informed by the growing disconnect. But we would be hesitant to lean too heavily on last year as a template just yet. Two important differences remain: first and foremost, the GLI, ISM and other important indicators began to weaken last spring, and we have yet to see clear evidence this time around. And, although oil prices were a constraint then and now, financial conditions remain quite loose. But we do take the market signals seriously, and will continue to weigh the evolving data against these signals.
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Wait a second, is this because they underwrote Greek CDS?
Goldman's Dubious Deals: Is This 'God's Work'?
http://www.businessweek.com/articles/2012-03-07/goldmans-dubious-deals-is-this-gods-work
and by bearish, Goldman means bullish
Fresh milk is always on the front of the shelf. True.
They are the market makers, so however they are going to make the market is how it's going to turn out. Perhaps like God, they will make the market in their own image: a Vampire Squid.
Caution: Predictions may or may not match the market they make.
Goldman is bearish because bonuses are going to continue to shrink.
go long!!!!!. all the puppeteers are vying for reelection this year. they are working overtime to make sure the bumps in the road are small at best............
goldmans .. aka the biggest rampers in the world are now 'market neutral' hahahaha
what happened to the emerging market growth story, the green shoots uh uh uh ... F9CKWITS.
RupeshPatel (CSC)
Fuck me now I have to go long cuz GS is bearish?
While I understand what your trying to say, you should work on your punctuation.
Fuck TPTB! you cant even invest in this market any longer...
The over-profits of the shark loans in the USA not only did not turn their dollars into inflationary money, but also they were multiplied and exported abroad in the form of “investments”. The illegally “increased" dollars of the internal USA economy become tons of “investments” abroad. FED printed cheap money and loansharking multiplied this money in an unnatural way within the American economy boarders and they discarded them abroad so that they did not threaten USA. USA became the first state in the world with artificial “breathing” ...the first state that burdened the international economy with its “breathing” ... and this is where everything started ...this is where the current shabbiness started, Loan sharks that are international today and “hide” behind the vague term of “Markets” are in fact the old loan sharks of the American market. They by controlling the USA monetary system “pumped in air” constantly in order to make profit from the USA “breathing”.
http://eamb-ydrohoos.blogspot.com/2012/01/global-debt-crisis.html
Authored by PANAGIOTIS TRAIANOU
The HFTs may not buy into this death by a thousand cuts bs.....they swing a big blade.....