Goldman Sachs trader: Don't waste your efforts shorting the bubble, look for a new bull market instead
Goldman Sachs trader and strategist Paolo Schiavone pointed out that as volatility disappears, most traditional macro trading strategies have become ineffective, including going long on the dollar, shorting the pound, and shorting U.S. stocks and long-term U.S. Treasuries. He suggested that investors turn their attention to new bull market opportunities: copper, uranium, Bitcoin, Oracle, the Brazilian market, and the UK market
Shorting bubbles and bear markets is a "waste of time," better to seek new bull market opportunities?
Recently, the volatility in financial markets has significantly decreased. The volatility of the euro against the dollar hit its largest single-day drop since 2020 this Tuesday. Goldman Sachs trader and strategist Paolo Schiavone pointed out that with the disappearance of volatility, most traditional macro trading strategies have become ineffective, including going long on the dollar, shorting the pound, and shorting U.S. stocks and long-term U.S. Treasuries.
Schiavone suggests that investors shift their focus to new bull market opportunities. He listed several potential "fast horse" investment areas: copper, uranium, Bitcoin, Oracle, the Brazilian market, and the UK market.
"Focusing on shorting bubbles and bear markets is a waste of time"
Although recent yield increases have been rapid, second only to 1981, Schiavone pointed out that from a historical perspective, the current rise in yields is not unprecedented. Similar scale yield increases occurred in 1981, 1995, and 1998. Therefore, there is no need to be overly fearful at present.
Focusing on shorting bubbles and bear markets is a waste of time; investors should actively seek new bull market opportunities.
The U.S. stock market has performed strongly recently, rising for eight consecutive days after the CPI was released. Schiavone believes that the clearest trading strategy this year has been to buy the stock market on pullbacks.
Schiavone noted that the future direction of the market will mainly depend on the policies of central banks. He expects that central banks will maintain a dovish stance, especially in the context of Trump's global call for interest rate cuts. He proposed two possible scenarios:
a) The Federal Reserve eases policy in a non-recessionary economy, benefiting risk assets.
b) The Federal Reserve eases policy only to find that inflation issues remain unresolved, leading to a tightening of policy and negative growth shocks.
Schiavone believes that the market environment in 2025 may be similar to that of 2024. He advises investors to pay attention to inflation trades in assets that perform well in the first half of 2024, such as the S&P 500 index, copper, gold, and AI-related assets.
