'Everything You Knew About The Market Flipped This Week': Top Goldman Trader

Friday was one of the most uncomfortable sessions on the desk since Liberation-day, according to top Goldman Sachs derivatives trader, Brian Garrett; with trading desks waiting for the 4pm bell ('make it stop') and yet there was a very clear understanding that a weekend headline could cause yet another green dot Sunday.

As Garrett notes in his 'weekend prep', the rolling pockets of volatility we’ve discussed every weekend since January finally moved from “under the surface” to “in your face”.

Every vol surface across asset class has now flinched (vix, rates, credit, fx, commods, etc) and the only thing yet to give is actual index performance (reminder, we’re still only 3.4% off the highest SPX close in history).

Everything you thought you knew about the market flipped this week...

• leaders became laggards,

• safe assets traded like risky assets,

• long momentum names were sold,

• short momentum names were covered,

• our AI “at risk” of obsolescence basket rallied 5 days in a row (!).

Everything traded “wrong-way”.

Given the pain implied by the price action, its not surprising to see that l/s hedge fund performance finally flipped to negative for the year.

Goldman calculus has this cohort down 400bps last week alone (worst performance since Apr 2025 and worst weekly alpha in 4 years).

YTD 2026 performance is now down -0.2%, after being up as much as 4.3% less than a month ago

Prime Book

Gross leverage has come in, but its still extremely high (and seemingly not protecting HF performance the way it should).

To end the week, gross exposure dropped 1.5 points to 307% (94th pctl 1y lookback), net exposure down 2 points to 79.2 (66th pctl 1y lookback) 

As mentioned above, l/s community is now red on the year after an epic week.

Prime data also highlights that US listed ETF short positions rose 8.3% this week, indicative of elevated hedging activity 

One-Delta

Asset manager / long only activity in cash equities was frozen this week (flows finished with effectively no skew).

Hedge funds finished slightly better to buy, but the flow was indicative of short covering vs true demand 

Futures/CTA

Waiting for the CTA data to flip negative has been like watching an accident occur in slow motion.

The “short term trading signals are now in negative territory for most global equity markets.

Our models forecast $35bn of global equity selling as of Thursday close"...

This will look worse tomorrow morning.

The quantum of things to be nervous about continue to increase and the largest problem in my mind is that none of them have a clear off-ramp...

• geopolitics,

• labor market,

• AI disruption,

• capital expenditure,

• IG supply,

• HY spreads,

• commodity shocks,

• private credit, etc

...none of these are really set up for a taco moment release valve (i’m a taker of any opposite view / good news)

 Derivatives

The market has flinched again.

One ratio we keep on the desk is the 1d change of spx vs a 0.9x beta change to the font month vix future (~historical correlation). VIX futures (ie, skew) massively outperformed Friday...

The vol panic / vol stress indicator closed the week at 9.7.

The fact that the vol market is so distraught might actually be one of the few bullish things out there...

Below is an indicative grid of every asset class implied vol, with percentile ranks back to October 2009...

I can’t un-see the fact that some assets (largely commodities and fx) are trading at the highest level of implied vol since i was a second year analyst...

We have a new plot to deploy. We use the price of a very tight spread (“dirty digital”) to calculate the markets implied probability of an outcome (ie, 5:1x payout means 20% implied probability) … we’ll start the tool with USO (which traded 6x avg option volume Friday).

Over the next 3 months, the market is pricing ~45% probability of a 15% sell off and a 25% probability of a 15% rally … “fat tails” is an understatement.  

Trades

If you were long single stock protection I’d look to replace with 1-delta (ie, monetize the single-stock vol premium).

The energy and power complex continues to trade well, and it’s a safe place to remain invested (robots/chatbots need power).

Goldman research has doubled down on the bull call in Korea.

You are getting another chance to go long precious metals given the sell off.

I think many are still long small-cap for the "cyclical exposure", I'm not sure small cap stocks can handle $100+ crude.

The way MSFT is trading reminds me of how google traded last spring (right before they “turned on Gemini”) – still one of the best quality compounders out there and its on “sale”.

Good Luck!

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