Global markets reached levels of turbulence rarely seen this week, but traders at Goldman Sachs are unfazed and don’t believe it’s a sign of a big danger lurking. The S & P 500 and Dow Jones Industrial Average suffered Monday their biggest one-day declines since 2022. The market then roared back with the S & P 500 posting its biggest gain since 2022 on Thursday. As fears of a recession swirled and a hedge fund trade involving the Japanese yen unwound, the Cboe Volatility Index (VIX) , Wall Street’s preferred fear gauge, soared above 65 on Monday. That’s the third time that’s ever happened, following the Great Financial Crisis and the pandemic onset. .VIX ALL mountain Cboe Volatility index, long term “The tremors we are feeling won’t disappear tomorrow but we don’t get the sense anything sinister is brewing where it clearly was in Nov of 2008 and in March of 2020,” Goldman traders wrote in a note. Volatility has already dramatically eased from Monday’s levels. The Vix on Friday traded around 24, only marginally above Thursday’s closing level. And after the late-week comeback, the S & P 500 is only down for the week by about half of a percent. .VIX 5D bar Wild week for VIX Goldman traders expect gains going forward, but they see the path higher as a “choppy” one. JPMorgan traders echoed this sentiment in a note Friday. “At this stage, we have seen a functional correction (9.7%) but we have not seen the wash out in positioning that accompanies a correction,” JPMorgan’s trading desk wrote. “We trend higher a little bit more from here, but the market still needs to see evidence that the economy remains in growth mode.” JPMorgan traders have “low conviction” long positions on “Magnificent Seven” stocks, defensive sectors such as utilities and health care and cyclicals like financials and transports. Elsewhere on Wall Street this morning , Morgan Stanley named Eli Lilly a top pick after the pharma giant’s blowout second-quarter report. “We believe LLY offers the most attractive opportunity in our coverage for upside to consensus estimates, despite the stock’s outperformance,” the bank said. “LLY continues to have the strongest growth profile within our coverage universe.”
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