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Why One Goldman Analyst Thinks ‘Something’s Gotta Give’
Although Goldman's David Kostin seems too be taking a pretty benign view of the October U.S. equity rout (at least according to a note out Friday evening), the bank's Charles Himmelberg is sounding a more cautious tone.
Specifically, Himmelberg appears to be alarmed by the unresponsiveness of the short rate to the selloff in stocks. While the narrative lately has generally revolved around the notion that Jerome Powell is sticking closely to his penchant for data-dependence, Himmelberg says
I would tend to agree with this and your prior article that this was not the big one merely the first groan of the market adjusting to the stress of reality and this article that the market is still irrationally optimistic that this little dip with make Powell throw out his playbook and either freeze or rescind his rate hikes. I tend to think December will still see a hike and Trump’s tariffs will jump to 25% and maybe one of the other dozen or so risk events will play out and we’ll be well into swan country.
Writing this at 3:15 EDT, surprised to see JNK and HYG down only slightly, even as SPX fails miserably in its attempt to bounce today. If 2532 does not hold, I wonder if that’s what will lead to a sharp drop in JNK and HYG (?)