Summarizing investor sentiment in his Weekly Kickstart note, Goldman’s David Kostin writes that three macro issues dominated investor discussions about the US equity market since the start of the year: rates, inflation, and taxes.
Not surprisingly, interest rates have been the most important of these topics. In a rising interest rate environment, short duration outperforms long duration in both fixed income and equities and sure enough, of all Goldman thematic baskets, duration has been the best long-short trade, posting a +25% return since the start of 2021.
A sector-neutral portfolio of short duration stocks (GSTHSDUR) has climbed by +24% YTD compared with a -1% return for a long duration portfolio (GSTHLDUR). As Exhibit 1 shows, duration has been a major contributor to alpha generation. Read more…..
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Icarus TV
Former U.S. Treasury Secretary Hank Paulson describes the moment he knew Lehman Brothers’ fall meant the global financial system was at risk. He also relives his conversations with congress to get emergency powers for TARP and defends the bank bailouts.