Long or Short Both Difficult! Nomura Strategist: "Current Macro Volatility Carries Career-Level Trading Risk", Goldman Analyst: "Cash is King"

Ceasefire negotiations between the US and Iran have repeatedly stalled, with the market struggling to find direction amidst violent oil price fluctuations. Analysts from Nomura and Goldman Sachs have successively issued warnings: in the current environment, traders face extremely high risks regardless of whether they are long or short. Overnight, after the US proposed a ceasefire plan, Iran rejected it, causing oil prices to plummet significantly during the day, only to recover almost all losses by the end of trading. However, the stock and bond markets did not fall in tandem with the oil price rebound, showing a rare divergence. Meanwhile, Bitcoin and gold strengthened against the trend, while the dollar closed largely unchanged. Against this backdrop, Nomura strategist Charlie McElligott warned that the current accumulation of macroeconomic volatility has created "career-level risk," and a large number of traders are actually paralyzed; Goldman Sachs analyst Shreeti Kapa bluntly stated that in a binary risk environment, "cash is king" – given that the equity risk premium is close to zero and valuations are at historical highs, holding cash is a reasonable asymmetric position. Oil Prices Fluctuate Sharply, Stocks, Bonds, and Oil Show Rare Divergence After the ceasefire proposal news broke, WTI and Brent crude oil prices plunged 6% to 7% from their previous day's high, but then nearly fully recovered their losses by the close. However, the stock and bond markets did not come under pressure with the oil price rebound – the four major US stock indices closed higher across the board, although they weakened slightly in late trading. According to Bloomberg, the negative correlation between the S&P 500 index and WTI crude oil has lasted for 17 trading days (since March 3rd). This level of correlation has only been surpassed twice since the beginning of 2022, indicating the abnormality of the current market structure. It is worth noting that all of the day's stock market gains were concentrated in the few minutes after the ceasefire news was released, after which the indices essentially traded sideways. Based on their performance after the market opened, the four major indices actually recorded declines and failed to break through key technical resistance levels. The short-covering rally at the open also failed to form sustained momentum. Nomura: Macro Volatility Accumulates, Traders Widely Paralyzed Nomura strategist Charlie McElligott, in his latest commentary, pointed out that despite the temptation for reversal trades, hedging against volatility compression, and beta selling, traders are currently generally in a "paralyzed" state due to the superposition of multiple risks. McElligott listed five core pressures: First, the current accumulation of macroeconomic volatility constitutes "career-level risk." In the context of recent events, it is extremely difficult to get approval for short put options or short tail risk; Second, there is "widespread skepticism" about a "quick resolution" to the conflict, as the structural damage caused by commodity supply shocks to the global economy, and the prospect of central banks raising interest rates against a backdrop of fragile growth, are difficult to eliminate in the short term. Furthermore, he highlighted three other risks developing simultaneously: clear signs of deterioration in US employment trends; the continued disruptive impact of artificial intelligence on industries, further impacting the labor market; and the redemption and liquidity crisis in the private credit market. Goldman Sachs: High Valuations, Near-Zero Risk Premium, Cash is a Reasonable Asymmetric Position Goldman Sachs analyst Shreeti Kapa assessed the current market from a broader macroeconomic perspective. She noted that since the outbreak of the Middle East conflict, the MSCI World Index has fallen by about 7%. While this is still a small pullback in the long-term historical context, the current market valuation environment is far more fragile than in previous crises. Kapa emphasized that compared to the 2022 energy shock, current stock valuations are not only higher than the lows at that time but also higher than the levels on the eve of the previous energy shock, and this conclusion holds true across multiple valuation metrics. She also pointed out that the market has largely priced in interest rate shocks but has priced in limited growth risks – a sharp contrast to 2022, when real yields surged from negative territory, leading to a larger interest rate shock. Based on the above assessment, Kapa concluded: In a binary risk environment, optionality and liquidity are more valuable than directional bets. "Investors who perform well in these environments are not those who accurately call the bottom, but those who have cash on hand to deploy when uncertainty dissipates." She stated that given the current near-zero equity risk premium and historically high valuations across regions and sectors, holding cash is effectively a reasonable asymmetric position – investors give up almost no expected returns while gaining considerable flexibility.