By Bobby Molavi, Goldman trader and Managing Director
The last few weeks have been borderline unplayable. A market where macro, micro and geopolitics have all co-mingled and competed. A market where headline index has suffered while beneath the surface sector and stock dispersion has been savage and substantial. The quantum of moves around earnings caused one client to quip that 5% was the new 1% in relation to daily moves and standard deviations. All the while carrying risk has proven increasingly hard, positioning and crowding become a material risk factor in and of itself and increasingly there being nowhere to hide (pharma, quality, defensives all coming under pressure). The net result was that global stocks lost around $1.5 trillion in market cap in the last week or so.
What last week did feel like was a market digesting the interplay of higher and higher for longer, a slowing economy, a nervous consumer, a geopolitical backdrop with real and substantial left tails and a market still trading rich and without the equity risk premium you’d expect. Investors of all categories de-grossed at the margin, the only reason the de-grossing wasn’t greater was due to an increase in shorts. Nets have clearly come down….our global long short ratio at 170% hitting all time lows and a material reset lower from the 215% we saw earlier in the year. Longs also starting to worry about the prospect of redemptions and asset re-allocation.