Goldman Trader: Many Have Thrown In The Towel On 2022 And Elected To "Shut Things Down" Into Year-End

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by Tyler Durden
Tuesday, Nov 29, 2022 - 09:45 PM

By Bobby Molavi, Goldman trader and managing director

A year of shocks to the system just wont end. A couple of weeks ago now we felt the pain of an unexpectedly positive CPI print followed by a confirmatory PPI print. The fed ‘dovish’ tilt juxtaposed with the lack of gross and extreme bearishness the seeming catalyst for 6 consecutive up weeks in Europe. Combination of buybacks and $150bn of systematic covering/buying a material tailwind in an illiquid market, the combination of which triggered a huge factor rotation, a growth/tech rally, as well as one of the largest short covering events in history. Wherever you looked there was pain beneath the surface. Either in the form of spread blow outs, short squeezes, underperformance vs benchmarks due to cash levels, crowdedness pain or simply performance slippage. If engagement and market volumes are anything to go by it does feel like the latest ‘event’ has been enough to see many throw in the towel on 2022 and effectively elect to ‘shut things down’ into year end. As if on queue post a recent market rally…Bullard saying “markets under-pricing….the risk that the FOMC will have to be more aggressive…”. One step forward….two steps back. Well only half a step back….so far.

We saw supportive China stimulus (property) and hopes of re-opening and the gdp tailwind that would come with it…and we saw European confidence surveys showing sign of a turn. That being said, the recent UK CPI (above 11%) a timely reminder that regions are in different stages of normalization and where they live in relation to being in front or behind the curve varies from country to country and each regions consumers also in different places in terms of savings, headwinds and resilience. The one step forward, two step backs nature of the market reflected by the China narrative shifting in the space of a week from hope around re-opening and the hint of improving relations with US to a spike in Covid to something much more bleak. This weekends news highlighting risk of new shutdowns with Beijing recording highest number of cases since the start of the pandemic. With this came increased civil unrest (iphone factory and xinjiang) around Covid restrictions and open criticism of Xi. For me, there is one key question. Has something changed or are we still in the Matt Fleury paradigm of a ‘rolling bear market’…and just in the midst of the latest example of a bear market squeeze…albeit a bigger one than usual. SX5E now up 13% from the lows…not something to easily dismiss even if most (including me) remain somewhat bearish. Easy to forget that 2000-2002 saw 3 separate 30 to 40% individual rallies on the nasdaq on a peak to trough 85% sell off.