"Too Early For An 'All Clear'": Goldman One-Delta Desk-Head Sees Investors In 3 Camps

The market continues to grind higher driven largely by unilateral signaling from the US around potential ceasefire negotiations.

Goldman Sachs One-Delta desk-head, Rich Privorotsky, says the shift from escalation to even outlining talks matters...

There’s some credibility now that JD Vance is involved, suggesting the US is becoming increasingly reflexive to:

a.) markets… more rates than equities...

b.) polling...  “President Donald Trump’s approval rating fell in recent days to its lowest point since he returned to the White House” (RTRS).

For now, markets anchor on whether talks actually materialize:

“The U.S. and a group of regional mediators are discussing the possibility of holding high-level peace talks with Iran as soon as Thursday, but are still waiting for a response from Tehran” (Axios).

3 Camps

Privorotsky sees three clear camps across clients…

1.) this is stalling and posturing, with the US buying time ahead of potential military escalation into the weekend…every rally should be sold... you can’t jawbone molecules.

2.) genuine progress toward a peace framework.

3.) a hybrid…talks are being seeded while troops continue to move, i.e. signaling  plus pressure.

The head of EU equity execution says he is in camp 3.

The market was too pessimistic on even getting discussions off the ground.

That said, early rounds are unlikely to produce anything durable. 

Betting odds on ceasefire now ~50% by end-April. 

On Hormuz, there are signs Iran is allowing some conditional transit…effectively tolling flows…which eases the immediate tail but is structurally untenable and keeps leverage firmly with Iran. 

Think too early to call the all clear but think market can begin to shape the contours of the end game (ie they start far apart with demands and work closer together).

For markets, the primary issue is not equities…it’s rates. 

The real damage is in rates volatility.

Central banks, particularly in Europe, are leaning hawkish while fiscal pressures are building. 

Governments already stretched now face higher defense spending and potential subsidies if energy stays elevated. 

That combination is toxic for bonds.

This is actually the environment gold is supposed to work in, and the recent liquidation likely improves the entry point. 

To be clear…the constraint on global risk is rates vol.

The level and speed of moves are not sustainable for risk assets.

Rates need to stabilize for equities to function.

A ~50bp move in US 2y over ~3 weeks is the largest since the Silicon Valley Bank collapse. 

The latest US auction tailed…weakest bid-to-cover since May 2024... and biggest tail since March 2023.

Watch US 5yr auction and some longer dated German paper.

Sentiment/positioning

There was a meaningful short-covering squeeze on Monday post Trump tweets, but positioning and sentiment remain subdued.

Vol is still elevated…VIX ~26 and V2X higher...so there is still a premium embedded in the tape. 

Even if we fade into the weekend on another escalation scare, base case is a rinse repeat dynamic.

White House leans back into negotiations early next week.

That’s how this grinds toward de-escalation...

Tactical Views

We’ve had the bounce... ~5% off the intra-day low in Eurostoxx lows…so tactically makes sense to tap the brakes into the weekend. 

Final confirmation of talks occurring tomorrow prob worth getting back to neutral. 

Modal outcome is the first round talks probably don't go anywhere. 

That said, downside likely less violent than last week given we’ve entered a de-escalatory pattern.

Still, miscalculation risk remains high.

Structural views

AI remains the dominant theme... the winners are all in the hardware and most of that is in Asia.

Jensen Huang’s AGI framing is directionally right. 

Multiple compression is real across growth/tech. 

The leadership pool is narrowing, not broadening.

Prefer Asia (Korea, Taiwan, Japan) as longs, hedged with Europe.

Software weakness I will continue as very structural de-rating…watch IGV breaking lower…that has broader multiple implications. 

Still cautious US overall.

Financials unattractive given credit + curve.

Like healthcare, but needs rates to cooperate.

Brazil stands out as a structural EM long.

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