"My Head Hurts": Top Goldman Macro Trader Warns Of 'Violence' Everywhere

"My head hurts..." is how Goldman Sachs Partner, and top macro trader, Bobby Molavi, begins his weekly ruminations on macro, micro, and markets, poignantly stating that it does feel like we are dealing with violence in all its forms at the moment.

• Literal and physical violence.

• Market and volatility violence.

• Positioning and pnl violence. 

None of it feels good, Molavi says, and navigating these conditions is proving challenging to say the least...

The last couple of weeks have been seen a shift from hope to acceptance and then a headline driven oscillation between fear and panic.

End of last week signaled a shift from carrying gross and hoping for (perhaps expecting) a ceasefire that never came towards capital outflows and risk off.

Long only community having one of their bigger net sell weeks on record as investors began to move their feet.

While explainable (positioning and central bank funding) it is strange to see a conflict with 'wrong way moves' - rates up, gold down, equities flat-ish.

Perhaps a sign that the market structure has permanently changed, as have the players in it (more quant/more retail), and as such historical and traditional patterns hold less now than we’d expect.

To that end…we’ve seen a range of traditional cross asset correlations break down….for example Equities surprisingly resilient…leadership shifting but headline somewhat stable….gold and its safe haven status being muddied as it traded down…most likely due to it being a funding tool…and finally bonds lower rather than higher driven by positioning and forced unwind. 

The start of this week saw the markets focus on an ultimatum and ticking clock.

The relief of the Monday tweet around 'talks' quickly subsided into confusion from the rebuttal and we have lived in a world of negotiation and war narrative headline bingo ever since.

War over…war ramping up…talks happening….no talks at all….negotiations….negotiations with yourself.

The sum of the parts is causing fatigue and confusion and leading to less hope and more action in relation to risk.

It’s amazing how much things can change in a few weeks... we came into this year focussed on monetary, fiscal and regulatory tail winds….focussing on more M&A and a heavy IPO calendar as corporates focus on growth rather than multiple expansion and founders/owners focus on liquidity and cash return.

Now we spend our Fridays watching for tweets and dealing with 'wide tails' and weekend risks.

Velocity of rate move and its impact on equities...

In reality the backdrop holds…various tailwinds from capex, transformational tech, deflation, fiscal and regulation…a corporate searching for growth and thinking risk-on but with one big complicated caveat... and that is of a resolution in the middle east before too much damage is done. 

Gulf war 3 and escalation ladders. 

Last weekend's ultimatum felt like a pivot point no one wanted or celebrated…the relief around the Monday message of talks of palpable…the wider tails narrowing and anxiety of escalation eased.

Unfortunately the rest of this week has tested that thesis.

The Trump administration's press conferences simultaneously talking of a war that has ended, a war won, threats to escalate, willingness to carry on for weeks, threats to nato and allies for having not helped, then asking nato and allies for help with Hormuz, talk of negotiation…then rejection of negotiations….and that was a Thursday.

What is clear... is what was hoped to be quick, decisive and contained has now spilled over into something regional (arguably global) and with broader impacts everywhere.

Macro. 

It does feel like Equities is the ‘tail’ and not the ‘dog’ at the moment.

The real action taking place in Oil, Nat gas and the front end of rates….and the ‘big ball’ being credit (so far stable).

The front end of rates have seen dramatic moves...

...with a world positioned for cuts…just how many and how soon the only variable…to a world pricing in 2 to 3 hikes in the UK and Eurozone….and a US market now pricing a 50% probability of a hike.

And Real rates are in a word 'extraordinary'...

Enough ink has been spent on the Oil and NatGas moves..but the quantum of moves and speed of moves have resulted in all our focus remaining there…and soon the focus will shift to second derivatives…such as impacts on fertilizer access and food crops/harvests….

Impacts to supply chains for key parts of global economy (helium for chip as one example) and finally the sobering reality that we remain a world of $8bn people hugely dependent on an ancient fossil fuel. 

Unintended consequences.

This conflict hitting Oil, freight, shipping, supply chains, fertilisers as well as key materials (helium, aluminium, plastic) that in tern impact key drivers of everything (Ai capex, food, power/energy, infrastructure build).

Then what of leverage and liabilities when adjusted for an unexpected shock to demand and margins.

Think a double whammy in some spaces as demand for products decline (price or risk) at the same time as the cost of living hit them being harder (due to manufacturing costs and shipping costs).

Think about consumer behaviour and psychology and this goes from a bilateral contained conflict…..to a regional conflict….to something bigger with knock on effects everywhere (inflation, rates, jobs, savings, equity markets etc).

Performance. 

Last year was a great start which was then destroyed by liberation day and a systematic de-gross leaving many investors resetting their year to zero or worse toward the end of the quarter.

In 2025 Europe Quality saw its worst years in history...

It feels like 2026 rhymes but with the Straits of Hormuz being the catalyst and the pain being less evenly distributed.

Most, if not all, have suffered from corrections across Software (Ai disruptions), Front end rates (hard to navigate 1 to 3 cuts to 2 to 3 hikes without pain), Oil (a funding short that caught most/all), Banks (consensus long coming into the year with alts and private credit narrative dragging down space), Quality and Momentum factors, Emerging markets (the Asia trade resetting hard with Korea, Taiwan, Japan all suffering draw downs).

EM benefitting from flows, De-dollarisation, search for alpha and diversifictation and moves up risk curve. Recent Asian performance in places like Taiwan and Korea show that trend hitting a speed bump. 

The silver lining…as was the case last year…plenty of the year to go and still much to play for in a target rich and heavy dispersion world….just have to move fast….see Gold on Monday as one case and point.

Micro in a world of macro.

Being a single stock operator in a world like this is challenging, exhausting and confounding all at the same time.

We see single stock moves of 20 to 40% on the back of terminal value debates, theme and narrative shifts as well as Macro moves.

On one hand, share prices are being moved by Oil prices, credit market, rates moves and how the macro will feed through into GDP, the cycle the consumer and finally single company earnings.

On the other hand, share prices being moved by technical factors like CTA supply driven by risk parity, trend and/or cross asset vol. By products like zero day options, etfs, sector baskets, factor baskets and single stocks.

By drivers like fundamental or signal. On durations that range from 1 minute, to 1 hour to 1 year and longer.

Finally share prices being moved (perhaps most aggressively) by debates around themes like ai disruption and private credit

Energy. 

Highlight of my week was hearing someone talking about ‘tracking molecules through the strait’...I think that was code for big tankers full of oil.  

For now the focus remains on spot and the supply shock.

Also whatever the path from here for how long that supply/production system will remain impaired.

Some focus now shifting from whether the supply shock turning into a demand shock.

Also separately, this could re-ignite the focus (and capex) on sustainable and alternative forms of energy.

The dependence on an ancient fossil fuel 

Food. 

Keeping an eye on fertilizer prices and crops as we approach harvest season.

It is one thing to deal with Oil shocks…it is another to deal with food shocks.

In my humble opinion if there is a left tail in plain sight in this conflict it is the rocketing price (and therefor affordability) of fertilizer and the potential (lets hope not) impact on harvests and what that could mean next for people, regions and markets. 

Public vs private.

Volatility laundering, asset/liability mismatch, gating, retail…the media seems to have embraced the private credit news cycle aggressively.

Many headlines and stories talking about gating of funds…or mark to market adjustments…or reviews over back leverage…or retail and liquidity mismatches….or the risk of more ‘cockroaches’.

Every day another headline around a fund capping withdrawals or redemptions but in reality this is on a fraction of the total private credit NAV… and arguable (as some sponsors have said) a ‘feature not a bug’ to protect performance, the portfolio and remaining investors.

I think the more interesting long term questions will revolve around asset allocation and to what degree certain segments of the market have over indexed to ‘illiquidity’ in a world with higher volatility and more uncertainty and where need for liquidity can appear for unexpected reasons. The other interesting dynamic is whether this will drive dispersion in terms of GP performance and showcase alpha vs beta within the asset class. As per the public markets…no two investors or asset managers the same….it is just that public markets mark you to market daily…whereas private markets give you years. . Frankly the questions around Private credit seem to be all over the place…and when you ‘double click’ quite often…people asking about different things or conflating different issues. Are you worried about underwriting standards, are you worried about back leverage, are you worried about Alts performance, are you worried about BDC and liquidity mismatch, are you worried about retail exposure.

In reality….no two funds are the same and lumping all managers and private credit strategies into one homogenous group is wrong….but…..when things get stress sentiment and momentum matter and for now illiquidity, crowding and ‘stories’ seem to be driving the bus. 

Grids and potholes. 

Not natural bedfellows .

But examples of things - grids and roads - that work and degrade slowly….and then get to a place where issues form - outages and potholes - that require heavy and long direction capex cycles to rebuild and repair that no one wants (or are incentivised) to pay.

You look at the benefits of small cell investments for China and diversified sources of energy - oil, gas, coal, solar, nuclear…and the benefits of longer term thinking and long term greed in relation to heavy capex for things like energy independence and sustainability.

AI and jobs. 

Most of the focus has been on job cuts….and how AI will disrupt everything and everyone.

I thought it interesting to read about Open AI doubling their work force with a focus on ‘product development, engineering, research and sales’…or ‘technical ambassadorship’ or what i would describe as ‘forward deployed engineers’.

The people who would go out to ‘enterprise’ and bring the power of this technology to life within the respective organisations by educating the people within them on how to use to solve problems.

Viewed another way... a reminder that AI can’t disrupt everything…and even if intelligence has been repriced to zero and every company.

Sector and job can be disrupted…it turns out one of the ‘AI Winners’ still needs sales people. 

Art imitating life. 

Been thinking about this a lot recently in the post-covid and AI-age.

As an experiment….I watched Matrix, World War Z, Ex Machina and….the Terminator in recent weeks.

I wont lie it didn’t leave me feeling warm and fuzzy.

More importantly….Sci fi can be a prescient predictor of the future.

Space Odyssey predicting tablets and iPads, Enemy of the State hinting at modern surveillance and a Palantir world….Dune and Minority report hinting at drones…The Truman show touching on the excesses of social media, product placement and influencers…Fahrenheit previewing ‘ear pods’.

Now…apply this same ‘predictive power’ to areas like robotics, automation, generative AI and read recent articles on AI agents conspiring or ‘fake news’ in an AI age…or just the paths for ‘companies’ like Cyberdyne and Skynet….then think about the risks that come alongside the opportunities. 

Power law + Compounding. 

Traditionally venture was built around predicting the future, talent spotting in relation to founders and then a battle for access early.

The combination of which would give you a shot at an early investment in Facebook, Stripe, Revolut, Athropic etc.

That seems to have evolved into an arms race for access….and willingness to go bigger and bigger on concentrated size bets on companies and themes and the emergence of funds like Thrive and/or positions that can be in the $10’s of billions for certain VC’s in a private for longer and bigger in private world that we live in. 

The power of retail. 

As technology, retail and markets come closer together we are seeing structural changes in terms of who is trading stock (volumes), who is moving stock (meme and retail momentum) and who is owning stock (50% by households).

Effectively as barriers to access go down (neo brokers, iphones and a click away from a trade) and as returns go up on themes many follow (Ai, Gold, Trump trades) we are likely to see more structural change. Retail used to be a side show for the markets…now we see over a 100m active monthly ‘retail’ traders in the US. We see more gamification of markets with the likes of Kalshi and Polymarket making everything tradeable everywhere with prediction markets.

The regulatory winds of change are upon us and as Barry Ritholz notes…in a post Gary Gensler world we are moving towards a ‘technology forward…permissive’ environment. We’ve seen the SEC drop cases cases against Opensea, Robinhood and Coinbase, we’ve seen them decide that memecoins are not securities and we saw year on year growth in terms of retail ‘traders’ across each of Fidelity, Robinhood, Charles Schwab and Interactive brokers. We also saw retail trading options grow from around 12bn contracts a year to 15.2bn contracts and zero day options now accounting for around 59% of daily SPX options volume.

How is this changing other things? Holding periods went from, on average, 8 years in 1960 to a few months in 2020.

As the era of Buffett ends...perhaps with it also comes a challenge to buy and hold? As the quants and systematic community deliver 20 to 30% a year by trading anything from 1 minute time horizons up...the value of trading and the perceptions around shorter holding periods might change. Once upon a time people wanted to be footballers, tennis players, doctors or lawyers...maybe now they will want to become traders. 

Wishing all a restful weekend... and hoping for calm waters and no tweets. 

Professional subscribers can read Bobby's full 'Ruminations' here at our new Marketdesk.ai portal