{"id":1545333,"date":"2025-07-04T20:00:00","date_gmt":"2025-07-05T00:00:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1545333"},"modified":"2025-07-04T20:00:00","modified_gmt":"2025-07-05T00:00:00","slug":"a-highly-kinetic-period-goldmans-hedge-fund-honcho-reflects-on-h1-what-lies-ahead","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/a-highly-kinetic-period-goldmans-hedge-fund-honcho-reflects-on-h1-what-lies-ahead\/1545333\/","title":{"rendered":"“A Highly Kinetic Period” – Goldman’s Hedge Fund Honcho Reflects On H1… & What Lies Ahead"},"content":{"rendered":"

“A Highly Kinetic Period” – Goldman’s Hedge Fund Honcho Reflects On H1… & What Lies Ahead<\/span><\/p>\n

\n

The first half of 2025 was a highly kinetic period,<\/strong> to say the least, according to Goldman Sachs head of hedge fund coverage, Tony Pasquariello.<\/p>\n

With a touch of distance from the screens this week, he went back and read a bunch of his recent notes, which served as a reminder of the immense narrative volatility along the path<\/strong>.<\/p>\n

For example:<\/p>\n

US exceptionalism<\/strong> was a bright and shining consensus position at the start of the year…<\/p>\n

…that gave way to the worst short-cycle selloff <\/strong>in domestic equities since the depths of COVID…<\/p>\n

…only to see S&P close out H1\u201925 on the dead highs<\/strong> (and we\u2019ve kept going).<\/p>\n

What follows from here is a set of views that Pasquariello took away from the past six months — with an eye towards the next six months…<\/p>\n

MARKET DIRECTION:<\/h2>\n

– given all of the uncertainty and volatility, it\u2019s hard to look back and NOT be a little impressed with how the US economy has performed.<\/strong><\/p>\n

– remember, in the toughest moments of April, many folks believed that a US recession was all but in the bag.\u00a0<\/p>\n

– in practice, the risk management challenge was two-fold:<\/strong> calibrating huge changes to US political orthodoxy — at the exact time as new and disruptive technologies were colliding.\u00a0<\/p>\n

– if you flash forward to today — with NDX nearly 40% off the lows — Mr. Market has added another data point to this analog:\u00a0periods of exceptionally high policy uncertainty usually give way to strong equity returns.<\/em><\/p>\n

– the April shakeout also calls to mind this well-worn rule of thumb: within a structural bull market, if you want to be short US equities, your timing needs to be impeccable.\u00a0<\/strong><\/p>\n

– now, in trying to work out how the market recovered the highs, perhaps it\u2019s simply because governments, corporates and households stayed on the gas.<\/p>\n

– don\u2019t take my word for it, simply look at the trajectory of US fiscal spending … or the capex plans of the Magnificent Seven … or US retail demand for stocks.<\/p>\n

– looking forward, the bull case is this: the US economy is durable, financial conditions are easy and we\u2019re witnessing a remarkable acceleration of applied innovation.\u00a0<\/strong><\/p>\n

– set against that, growth is apt to slow during the second half, risk\/reward at this multiple isn\u2019t alluring and global bond markets skate on thin ice (witness the UK again this week).<\/p>\n

– in the end, it\u2019s still a bull market, yet one that\u2019s delivering less convexity and less consistency than before — I wrote that earlier in the year, and I\u2019m sticking with it.<\/strong><\/p>\n

– core positions that I believe in (and would marry as a composite): US technology \/ US power … steeper global yield curves … a (somewhat) weaker dollar … and don\u2019t fight the primary trend in gold.\u00a0<\/p>\n

A SHORT SET OF THOUGHTS ON US TECH:<\/h2>\n

– I\u2019ve long believed that this space offers elements of sword AND shield<\/strong> — while there were some moments when both the sword and the shield had gone missing, NDX finished H1\u201925 up a very respectable 8%.<\/p>\n

– if Q1 was marked by the swing from Stargate euphoria to DeepSeek disruption, Q2 was marked by remarkable earnings news and an unrelenting commitment to capex.\u00a0<\/p>\n

– taken together, both champions and challengers were on the offensive,<\/strong> such that demand for compute was some form of insatiable … I don\u2019t see that changing anytime soon.<\/p>\n

– in addition, while the sensation around AI is shifting in the press (namely the risk of impingement on jobs), the capex stories were a clear support for the market (which could only amplify the societal challenges).<\/p>\n

– valuation: as Pete Callahan notes, NDX currently trades on a 28x P\/E, roughly in line with its 5-year average; while not a tailwind, I don\u2019t regard that as a headwind, either.<\/strong><\/p>\n

– what has clearly changed: in both 2023 and 2024, every stock in the Magnificent Seven rallied; at the halfway point this year, you had three up \/ three down \/ one flat.<\/p>\n

Conclusion: stay in the pocket, particularly into the seasonal sweet spot that is July.<\/strong><\/p>\n

US VS ROW:<\/h2>\n

– lest it be said, after a very long (and very powerful) run, the US was NOT the best game in town.\u00a0<\/strong><\/p>\n

– with a hefty slice of humble pie, I have to give credit to European equites — it was hard to make up a bullish story at the end of last year, but the fact set changed, and specific pockets totally shined (witness the DAX, the banks, the defense names).\u00a0<\/p>\n

– so, whether it was the game change in European defense spending — or the lightning strike that was DeepSeek — there were a few fundamental inflections that played to the strengths of non-dollar markets.<\/strong><\/p>\n

– now the question is whether structural allocators of capital will sell their holdings of US equities and put the chips elsewhere — again, I doubt it, and think the dollar bears the brunt of things for now.\u00a0\u00a0\u00a0\u00a0<\/p>\n

– in the context of that question, Brett Nelson highlighted a recent WSJ article\u00a0that reminds us of a clear truth: over the past 50 years, Europe has created (from scratch) 14 companies with a market capitalization of more than $10bn; the US has created 241.<\/strong><\/em><\/p>\n

– I also found this week\u2019s headline that AstraZeneca is considering a move of their listing from the UK to the US to be notable (when the headline hit, it was the single largest weight in the FTSE).<\/p>\n

– in effect, this was the real story of the first half: it was a bull market for GLOBAL equity indices<\/strong> — simply pull up a chart of MXWO — where the US didn\u2019t do all of the heavy lifting.\u00a0<\/p>\n

<\/a><\/p>\n

THE OTHER BIG DYNAMICS IN THE GAME:<\/h2>\n

– The Fed<\/strong>: our call is now for sequential cuts in September \/ October \/ December … then two more moves in March and June of next year … taking the terminal rate down to 3-1\/8%.<\/p>\n

– on geopolitics<\/strong>, I\u2019d argue that recent months underscore two long standing observations: (1) no one really knows anything; (2) markets have no moral conscience and tend to move on from things.<\/p>\n

– the dollar<\/strong>: this was the joker in the pack, from consensus long to start the year to consensus short by the end of Q2; given the Fed is set to out-ease everyone, and given more pressure on USD hedge ratios, again I suspect the path of least resistance is to the downside.<\/p>\n

– if there\u2019s a bolt-on to the prior line, it\u2019s that I find it really hard to pick other currencies that I actually want to own — which, of course, leads one back to gold<\/strong>.\u00a0<\/p>\n

– the deficit \/ debt sustainability<\/strong>: the first half was proof of how this variable comes in and out of market focus on a random cadence, leaving both bulls and bears with more questions than answers; I suspect it will be with us for a long while, and argues for steeper curves \/ more term premium.<\/p>\n

– flows, positioning<\/strong>: it never ceases to amaze me how market technicals can hold so much sway at market inflection points; I can only assume that technical discipline will continue to matter in the second half (the current bias is favorable, thanks to retail and systematic strategies).<\/p>\n

– a follow-on from the prior line: I\u2019d keep a close eye on gross exposures<\/strong> — which have been running very high, and saw a significant pressure test this week (e.g. the violent breakdown in the momentum factor).<\/p>\n

– breadth<\/strong>: yes, this has been a narrow rally, but such is life in a top heavy index; said another way, I don\u2019t buy the old wisdom that poor breadth means S&P is an unhealthy asset.\u00a0\u00a0<\/p>\n

– valuation<\/strong>: S&P trades on an objectively elevated multiple, yet that fact alone hasn\u2019t stood in the way of progress, and I suspect the onus is now on earnings to carry the load.\u00a0<\/p>\n

– bitcoin<\/strong>: brick-by-brick, I think it continues to achieve a modicum of respect as a long-term store-of-value (as much of the altcoin universe struggles).<\/p>\n

– stablecoins<\/strong>: this theme came on like a wildfire, and I suspect it isn\u2019t going to magically disappear anytime soon;.<\/p>\n

– hedge funds:<\/strong> you know my bias, but the fact is both discretionary and systematic managers are performing well.<\/p>\n

– the celebration of July 4th, I agree with this wisdom from the great Warren Buffett: \u201cwe\u2019re always in the process of change, and we\u2019ll always find all kinds of things to criticize in the country … but the luckiest day in my life is the day I was born, because I was born in the United States.\u201d<\/strong><\/em><\/p>\n

Finally, a chart for the road…<\/h2>\n

…one that invites as big a question as any right now.\u00a0<\/strong><\/p>\n

With thanks to Brett Nelson, this plots earnings growth of the US vs various cuts of ROW (12-month trailing EPS, expressed in local FX).<\/p>\n

<\/a><\/p>\n

To my eye, it clearly demonstrates why US equities have outperformed so much in the post-GFC era (particularly post-COVID).\u00a0<\/strong><\/p>\n

Now the debate turns on whether that immense gap is set to converge, or not:<\/p>\n

More here from Goldman Sachs Sales & Trading team <\/a>available to pro subs<\/a>.<\/em><\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nFri, 07\/04\/2025 – 16:00<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/markets\/highly-kinetic-period-goldmans-hedge-fund-honcho-reflects-h1-what-lies-ahead<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

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