Goldman Turns Bearish: "Relief Rally Was Too Fast, We Do Not Feel Comfortable Taking More Risk"
By Tyler Durden
The market’s volatile swing are clearly too much for the central banker-incubating hedge fund known as Goldman Sachs, because
… moments ago the same Goldman announced that:
“the recent relief rally might be short-lived, especially with oil prices now at the upper end of our commodities team’s forecast range for 1H 2016.“
and adding that “we make no changes to our asset allocation at this stage as the relief rally has been too fast, in our view. We still do not feel comfortable taking more risk in equities until valuation or growth becomes more attractive.“
Gartman flip-flopping within 3 days is normal, but Goldman? As for the “relief rally” being short-lived, it might be even shorter if Goldman’s various divisions for some reason are unable to communicate with each other on how to best fleece muppets.
This is what else Goldman thinks in its latest “recommendation”:
We make no changes to our asset allocation at this stage as the relief rally has been too fast, in our view. We still do not feel comfortable taking more risk in equities until valuation or growth becomes more attractive. Although we believe the market has been too pessimistic, we think a key driver of the relief has been higher oil prices. With oil at the upper end of our commodities team’s forecast range for 1H 2016, it could drive further volatility as we do not believe oil weakness is necessarily over. We still believe credit remains attractive, particularly in Europe, where further ECB easing and good credit fundamentals remain supportive. Although US high yield has rallied recently, over the near term we remain Neutral US HY within credit. Despite seeing fundamental value in US HY spread levels, downside risk to oil makes us tactically cautious (see Global Markets Daily: Oil and HY redux, March 8, 2016). We remain Underweight bonds given the relatively low level of yields, potential for reflation, and our economists’ expectation that the Fed rate hike cycle continues in June. We retain our relative preference for German Bunds over US Treasuries as policy divergence should play out over the coming months and drive the Treasury-Bund rate differential significantly wider.
Some more observations:
Volatility potential in a central bank filled month…should not be too unfamiliar given past moves
The ECB meets this Thursday (March 10), with the BoJ and Fed meeting next week…. Measuring how frequent extreme asset price movements have been in the past, the figure on the left below plots the average number of days over the prior 12 months with return moves (positive or negative) of 3 standard deviations or more by asset class, using rolling 1-year standard deviations. Since 1986, no period besides 2008-09 has had a larger number of relatively extreme asset price movements than we have experienced recently. This has been particularly true for the 10-year government bond and …read moreSource: Goldman Turns Bearish: "Relief Rally Was Too Fast, We Do Not Feel Comfortable Taking More Risk"
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