Sell (Or Buy) America? Goldman Traders Lay Out The Best Trades Across FX, Rates, & Commodities

Across many metrics (growth, financial conditions, employment, consumer confidence and spending levels etc) the US economy is outperforming most other economies and, with the “run it hot” consensus narrative for this year, it is expected to continue doing so with a high probability.

Despite that, as top Goldman Sachs trsader Abel Elizade points out in his latest note, the dominating narrative in cross asset markets over the past months have been the “Sell America” one, on the back of a combination of factors spanning from geopolitics, tariffs, resources’ security, demand for politically-safe reserve assets etc.

Every market development these days is judged with respect to the “Sell America” narrative, the latest one being the appointment of the next Fed chairman. 

The “Sell America” narrative has so far had a higher impact on FX (weakening the dollar to DM pairs on the back of higher hedging ratios as well as to EM pairs on the back of carry diversification), EM credit (again on the back of carry diversification to countries with lower weights on international investors’ holdings) and commodities (in particular metals on the back of politically-safer reserve assets and a move towards resources’ protectionism). DM credit and DM rates have so far only been marginally impacted by the narrative in our view. 

“Sell America” Narrative

To help investors navigate this, Elizade aggregate the MarketStrats asset class teams to highlight the trades they consider most attractive in both camps: the “sell” and the “buy” America ones...

Sell America Trades

Buy America Trades

Goldman's view is that the relevance of the “Sell / Buy America” narrative will fizzle out over time in the sense that there will be a growing set of “Buy America” trades that become attractive and investors pivot from trading the narrative directionally to trading it on an RV basis.

The performance of the US economy, the depth of the US financial markets and the fluid nature of the US administration’s politics will support many pockets of “Buy America” trades.

Professional subscribers can read much more from Goldman's Sales & Trading team here at our new Marketdesk.ai portal