Wall Street braced for a crash and got a rotation instead: money left chip stocks for small caps, health care and bonds. Oil faded Iran's escalation. The risk: volatility-targeting funds are still fully loaded, and a real shock forces them to sell.
Three things
- The crash call was wrong, and the rotation is the story. Goldman's prime desk says hedge funds dumped tech at a record pace through last Thursday, and small caps jumped 1.7% as short sellers in Russell futures covered.
- Oil refused to price Iran's escalation. Tehran said it has 'no choice' but to control Hormuz, per Bloomberg ASKB, yet WTI closed 1.8% lower because the war premium was already in the barrel.
- Private credit is still the crack to watch. The BDC ETF has lost 10.3% in a month even though index credit tightened today, and Blackstone reports Thursday.
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Cambridge Sigma Daily, written after the US close. For information only; not investment advice.