By Matthieu Martal, Goldman Executive Director and trader
The Fed made sure to discount March cutting odds, but credit risk concerns pushed yields lower – supporting equities in a backdrop of consensual bullishness and good earnings. Good news is good news, if bad news is good news too, then the dips are likely to remain shallow.
Desk views: The market has become very micro driven, which muddles the picture a bit, yet at a macro level, the crowded positioning set up makes it difficult to be very long here and the desk continues to look for pullbacks and a clearance of systematic overhangs before re-grossing. Back end yields also look low, putting a cap on equity upside. On the other hand, the Fed put remains present, earnings are fine and growth is resilient, credit contagion risk is limited. The desk continues to favor quality and momentum in a sector neutral fashion while remaining wary of beta and value exposure. We remain cautious of China exposed assets given the lack of policy clarity, and would favour companies with US revenues or with strong micro stories. Energy, miners and some industrials also look well positioned to benefit from the turning cycle while offering attractive valuations and carry.
