In his last note of 2024, one of Goldman's top traders Brian Garrett (full note available to pro subs in the usual place), writes that the last two weeks of this year have not been what was expected: specifically, on December 16, the two week S&P straddle was priced 1.25%, the average intraday trading band since 16 Dec has been 1.35% (i.e., the avg daily high low has been greater than the 2 week break-even). For those that have been away from the screens, Garrett warns that "bears have increased the volume, technicals are taking over the narrative, liquidity is challenged, and a healthy dose of risk prudence has only just started (shorts increasing, nets decreasing, etc)."

Below Garrett shares some observations from the Goldman trading desk on how we ended what was otherwise a stellar year (the S&P is up 24% YTD) and what they think is ahead: the punchline is that while the first year of trump presidency 1.0 ushered in one of the least volatile calendar years in decades (6.9 realized on 31dec17), hip shot suggests 2.0 will not be the same.

As a result, the Goldman desk...

1. favors equal weight vs market cap weight;
2. favors mid caps over large caps;
3. says to allocate some assets to gold;
4. allocate some assets to 6m downside;
5. says to keep an eye on VVIX (north of 110 alert set);
6. look at m&a targets (especially outside of the US, given the strength of the dollar).