The 'Ceasefire Discussions' Market Playbook: Goldman's One-Delta Desk-Head Warns Dip-Buyers

Markets are bouncing to start the week, but Goldman Sachs One-Delta desk-head, Rich Privorotsky, is not jumping on board yet... warning that we have seen these short-term spells of optimism during geopolitical crises before and being early to pick the bottom seldom wins.

No real progress in Iran, I'm not sure I've seen much of anything negative for oil over the weekend but appears there was already a lot in the price. 

WTI seems to curiously struggle above $100. 

Market’s sensitivity to the oil price appears to be diminishing… it now takes larger shocks to trigger equity sell offs.

Importantly, flows from Kharg Island do not appear to have been materially disrupted despite US attacks.

Betting markets seem to assign low and declining odds of a ceasefire by the end of April (around 35%)...

I get the impression equities are calibrated for something much sooner.  

This conflict involves at least three major actors, and one key variable will be whether Iran allows the U.S. a political exit or continues to apply soft pressure via Strait of Hormuz, even if ceasefire discussions begin. 

Note the playbook from Russian invasion of Ukraine…

Multiple ceasefire headlines rallied markets aggressively but ultimately went nowhere.

That will likely be the first major catalyst here as well… ceasefire discussions announced via intermediaries.  

We're not at a ceasefire yet but just remember the pattern: t+1 after that headline tends to be a good opportunity to sell into risk.

De-grossed + Hedged

Stepping back, people de-grossed very aggressively last week.

Asset managers sold a near record amount of SPX futures into the tape (CFTC).

It’s increasingly clear to me that the fundamental long/short community has rotated aggressively into index hedges.

Many books now look like long single names and short futures, which creates the dynamic we’re seeing… the index squeezes higher while the best longs go nowhere. PB:

“Fundamental L/S Gross leverage -5.1 pts – the largest weekly decline since Oct ‘24 – to 218.1% (87th percentile 1-year)...Global equities saw the largest net selling since early April ‘25 / ‘Liberation Day’ and were net sold for a fourth consecutive week (6 of the last 7, -1.5 SDs 1-year), as gross trading activity continued to increase driven almost entirely by short sales.” (PB)

Central Banks/Rates

It’s an eventful week ahead with the FED, BOC, BOE, ECB, SNB and a major Nvidia conference all on the calendar.

Most central bank meetings are expected to be holds, with the BOE the real toss up.

Rates has been a pain point for the street, and I haven’t spoken to a single client who hasn’t either wanted to receive European rates or already lost money trying.

The issue for Europe (and slightly the US)  is that policymakers are still living with the recency bias of the 2022 inflation episode and cannot afford to be caught behind the curve again.

It’s a somewhat different inflation impulse this time… but last week’s CPI has already led to material upward revisions in core PCE expectations.

Remember all that goods inflation… the LMI index collapse, the metals spike in January/February.

It’s not wage inflation or core services, but it’s still an unhelpful backdrop...especially before oil and refined products surged.

Credit

Credit is something we need to watch closely.

Last week brought a few developments that were quietly unhelpful.

Even though EuroStoxx has bounced off the lows, XOVER credit spreads have drifted back toward the wides.

Oil clearly matters and will remain reflexive for both rates and equities, but credit remains the North Star.

It has continued to bleed wider, which for me explains why equity rallies feel so fragile.

Risk

The Nvidia event could breathe a bit of life back into the tech trade at least in the short term (they are rarely anything but bullish).

If given the first opportunity, I suspect the market will try to buy EM. Brazil looks particularly interesting, with Flavio polling close to Lula + country's long agriculture and oil, geographically far removed from Hormuz, and looks like a structural winner the longer this disruption persists.

Defensives should also work if rates stabilize, so a bit of quality in the book makes sense.

Overall, I still don’t like the market for the five reasons outlined last week… but positioning matters. 

Note CTA models show nearly $70bn eq for sale this week (takes them flat).  

People feel very hedged, and sentiment is extremely low. Squeezes are inevitable but think ultimately rallies are meant to be sold. 

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