2023-04-22 06:07:52 ET
The broader market has proved its resilience post-SVB and as recession fears mount. But meaningful moves look tougher to come by amid battling fundamental forces, according to the head of global hedge fund trading at Goldman Sachs.
There was nothing in the regional bank earnings to derail the rally going into them, while volatility has come down, Tony Pasquariello of Global Banking & Markets said on Goldman's The Markets podcast.
The S&P ( SP500 ) ( NYSEARCA: SPY ) slipped 0.1% this week . The Nasdaq ( COMP.IND ) ( QQQ ) lost 0.4% and the Dow ( DJI ) ( DIA ) fell 0.2%.
"For all of the unknows out there, for all the trapdoors and potential tail risks ... volatility has come down a lot," Pasquariello said.
There are two reasons for this, he added. First, the regional banking crisis really hasn't protracted. Second, "you have a set of countervailing fundamental forces and some of those are good, some of those are concerning and that's just kind of left S&P stuck in the mud."
"So when the market isn't moving much day to day or week to week, realized volatlity compresses and therefore implied volatility compresses as well."
On the positive side, there have been 1M jobs created in the last three months and inflation has come down for nine consecutive months, he said . On the negative, housing has been "less than inspiring" and core inflation is still high.
Looking to sectors, after a 33% drop in the Nasdaq last year, clients are returning to tech ( XLK ) ( XLC ) ( XLY ), Pasquariello said. That is "thanks to a pretty decent decline in real rates" and in the case of the megacaps a flight to cash flow bias.
On Seeking Alpha's Investing Experts Podcast , SA Head of Quant Steve Cress gave his take on bank earnings, the megacap resurgence and the possibilities of a soft landing. He also talked in depth about his 5 best stocks for earnings season .
More on the Market
- Creeping Complacency Calls For A Correction: Conserve Cash
- Investors were sellers of fund assets for the first week in eight
- S&P 500: Earnings Recession, Deflation, Liquidity Crunch Likely Ahead
- Fund managers favor bonds over stocks by biggest margin since 2009 - BofA survey
For further details see:
Stocks more stuck in the mud than bulletproof - Goldman