Hard to go long, hard to go short! Nomura strategist: "Current macro volatility, trading poses career risks"; Goldman Sachs analyst: "Cash is king"

The US-Iran ceasefire negotiations remain in a tug-of-war, with the market struggling to find direction amid violent oil price swings. Analysts from Nomura and Goldman Sachs have issued warnings in succession: in the current environment, traders are facing extremely high risks regardless of whether they are bullish or bearish.

Overnight, the US ceasefire proposal was rejected by Iran. After a sharp plunge, oil prices recovered almost all of their losses by the end of the day, but neither the stock market nor the bond market followed oil’s rally lower—both showed a rare divergence. At the same time, bitcoin and gold strengthened against the trend, while the dollar closed largely flat.

Against this backdrop, Nomura strategist Charlie McElligott warned that the current accumulation of macro volatility has resulted in “career-level risk,” with a large number of traders effectively paralyzed;

Goldman Sachs analyst Shreeti Kapa stated bluntly that in a binary risk environment, “cash is king”—given that equity risk premia are close to zero and valuations are at historic highs, holding cash is a reasonable asymmetric position.

Violent Oil Price Swings and Unprecedented Stock-Bond-Crude Divergence

Following news of the ceasefire proposal, WTI and Brent crude fell 6% to 7% from previous session highs before nearly recovering all those losses into the close. However, stocks and bonds did not come under pressure as oil rebounded—the four major US stock indexes all ended higher, though they weakened toward the end of the session.

According to Bloomberg, the negative correlation between the S&P 500 Index and WTI crude has persisted for 17 trading sessions (since March 3), a level only surpassed twice since the start of 2022, highlighting the abnormal structure of the current market.

It is noteworthy that nearly all of the day’s stock market gains were concentrated within just a few minutes after the ceasefire news broke; thereafter, the indexes essentially moved sideways. Since the cash open, all four major indexes actually recorded declines and failed to break through key technical resistance levels, with short covering at the open failing to create lasting momentum.

Nomura: Macro Volatility Has Accumulated, Most Traders Are Paralyzed

In his latest commentary, Nomura strategist Charlie McElligott noted that despite the temptation to trade reversals, hedge against volatility squeezes, and sell beta, traders are generally “paralyzed” due to multiple overlapping risks.

McElligott outlined five core pressures: first, the current accumulation of macro volatility has created “career-level risk,” making it extremely difficult to get approval to short puts or tail risk against the backdrop of recent events; second, there is “universal skepticism” about a “quick resolution” to the conflicts, as the structural damage to the global economy from commodity supply shocks and the prospect of central banks raising rates amid fragile growth are unlikely to be resolved quickly.

In addition, he identified three more simultaneous risks: clear signs of deterioration in US employment trends; the continued disruption of industries by artificial intelligence, further impacting the labor market; and the redemption and liquidity crises facing the private credit market.

Goldman Sachs: High Valuations, Diminished Risk Premiums—Cash Is a Sensible Asymmetric Position

Goldman Sachs analyst Shreeti Kapa offered a more macro perspective on the current market. She noted that since the outbreak of the Middle East war, the MSCI Global Index has fallen by about 7% cumulatively. Although this is still a mild decline from a long-term historical perspective, the current valuation environment is much more fragile than past crises.

Kapa emphasized that, compared with the energy shock of 2022, current equity valuations are not only higher than the lows of that period but are also above their levels ahead of the last energy shock, and this finding is consistent across multiple valuation metrics. She also pointed out that the market has largely priced in rate shocks, but is still underpricing growth risks—a stark contrast with 2022, when real yields surged from negative, producing much larger rate shocks.

Based on the above, Kapa concluded: in a binary risk environment, optionality and liquidity are more valuable than directional bets. “The investors who outperform in this type of environment are not those who call the bottom correctly, but those who hold cash ready for deployment when uncertainty fades.”

She stated that given that equity risk premium is near zero and valuations across regions and industry sectors are at historic highs, holding cash is essentially a sensible asymmetric position—investors sacrifice virtually no expected returns while gaining significant flexibility.