Goldman: There Has Been A Material Shift In Market Dynamics And Sentiment

By Bobby Molavi, Goldman managing director and macro trader (pdf link)

Macro, Micro, Markets, Tech

The last week has hinted at a shift in market dynamics and sentiment. We had the May/June/July 'stop in' and beta chase, starting in the US on back of AI and duration assets which then broadened into a broader global equities rally built on an assumption of a soft landing. We had the dual benefits of weaker Jobs/Jolts/NFP data coupled with weakening inflation resulting in a view that rates were at peak. We had the tail winds of a Japan reflationary rip and also a China stimulus bounce. This drove a period of material short covering - the 2-month cumulative notional short covering through June & July was the largest since 2016 & was in the 97th %-ile of the last 10yrs.