Goldman Sachs hedge fund business director: The institutions I've been in contact with are almost all bearish, and those who understand physical commodities are even more concerned. The longer Iran procrastinates, the more the market tends towards short-term investments.

The current market situation is unprecedented in its difficulty for market participants. Currently, the downward risks are greater than the upward risks. Tony Pasquariello, head of hedge fund coverage at Goldman Sachs Group, Inc., pointed out in a recent report that the conflict between Iran and GEO Group Inc. has become the main source of market noise, leading to a significant increase in the intensity of various trading strategies. He warned that the downward pressure remains higher than the upward pressure, advising investors to simplify risk exposure and increase cash holdings moderately, in preparation to add positions at any time after the situation becomes clearer. Pasquariello stated that this conflict is one of the largest oil supply shocks in history, yet the U.S. stock market has not seen significant declines so far, which in itself is concerning. He cited a colleague's statement that "the market is increasingly inclined to bet on shorting time" - the longer the conflict lasts, the more likely the market is to evolve into a real growth panic, rather than just a supply-driven inflation shock. Both tactical long and short strategies coexist, but the risks lean towards the downside. Pasquariello listed the tactical bullish and bearish logic in the current market. Bullish factors include: Almost everyone in the professional trading circle he interacts with holds a bearish view, market sentiment indicators have dropped significantly; Systematic CTAs have significantly reduced long positions; Large index shorts have been established; The RSI of the S&P 500 and Nasdaq 100 has fallen to the lowest level since April last year; The outline of the Iran negotiation framework is emerging. Bearish factors include: There has not yet been a capitulation-style sell-off outside of short-term funds; Global bond market trends are also unsettling; The intensity of the conflict has not eased in the critical 48 to 72-hour window; Practitioners in the physical commodity market are sending more pessimistic signals. Pasquariello's overall assessment is that the technical aspect is tending towards balance, but the broader risk complex still leans towards negative outcomes, with continued gap jumps and dives, the risk-reward ratio is still unclear, but the intuition suggests that downside asymmetry still dominates. Concerns among practitioners in the physical commodity market Pasquariello's observations during his trip to Europe further reinforced his cautious stance. He noticed that those who understand physical commodities the most are more concerned than generalized investors. The current conflict has caused severe and sustained disruptions in the circulation of oil, natural gas, and refined oil products, triggering a series of policy restrictions, including export bans, fuel rationing, and mandatory work-from-home requirements. This means rising inflation pressures for business operations and increasingly negative impacts on economic growth. The mainstream pricing logic in the current market is viewing the situation as a supply-driven inflation shock rather than a major growth shock. This judgment is reflected in the steep decline in global front-end interest rates, as well as the outperformance of cyclical stocks over defensive stocks. He looked back on history and pointed out that the S&P 500 has dropped 19% from its high in February 2024 to its low in April, the VIX soared to over 65 in the summer of 2024, the BKX index plummeted 35% during the SVB crisis, and the Nasdaq 100 fell 33% throughout 2022. "The damage caused by this shock has not reached a similar magnitude," he believes, and this does not mean that the risks have been released. European stocks face capital outflows, while Asian stocks show relative resilience In Europe, Goldman Sachs Group, Inc.'s main brokerage data shows that accumulated long positions in European stocks over the past year are being rapidly liquidated. Goldman Sachs Group, Inc. has lowered its GDP forecast for the Eurozone in 2026 to about half of the level before the conflict, and expects the European Central Bank to raise interest rates in April and June. Asian markets show clear resilience. For example, in South Korea, despite continuous selling by foreign investors and a sudden pullback in U.S. storage chip stocks, the KOSPI has risen by about 29% so far this year. The Japanese market has seen a 1% increase in the Nikkei index this week under pressure from high commodity exposures. Pasquariello stated that based on customer feedback, South Korea and Japan are the two markets where investors have the most confidence in the medium term among all options. Tail risks remain high, cash holdings are recommended to be increased Pasquariello summarized all of the above assessments in four words: tail risks are high. He used the convergence of the forward P/E ratios of NVIDIA Corporation (NVDA.US) and Exxon Mobil Corporation (XOM.US) as an indicator of the times, believing that this signal itself indicates deep structural changes in the current market. "I still believe that there is no reason not to simplify risk, increase cash holdings moderately, and be prepared to quickly increase investment on the clearer side of the situation - I know it's easier said than done," Pasquariello wrote.