GS Garrett weekend prep

GS Garrett - weekend prep 20 Sep 2026 Brian Garrett · Goldman Sachs · Managing Director, FICC & Equities Sun 20 Sep 2026, 3:08pm ET

a remarkable amount of macro uncertainty is being priced remarkably cheap…

i/ a hawkish hike was delivered in the US and central banks across the globe firmly on a tightening path (here)

ii/ both brent and US crude closed with a 100+ handle every day last week

iii/ escalation in the middle east continues (houthi news this weekend), with no clear sign of an off ramp (trump xi this week, maybe?)

iv/ us 10y yields continue to knock on 5% and gs increased their year-end rates targets across developed economies (here)

v/ there is growing backlash against the ai trade, aka the largest driver of economic growth in the US

vi/ one of the more-consequential midterm elections in years occurs in less than 2 months

all of this (and more) and yet the vix closed friday with a 14 handle … index convexity sits in the sub 10th percentile … a handful of single stock convexity sits at the 0th percentile … etc

timing is hard, and “buy when you can not when you need to” has been said many times this year … the data below shows a market that has begun to re-risk … the implied vol market is allowing you to augment this view in limited loss strategies at levels not seen in months/years

stock replace into the midterms with singles implied vol … we have seen demand for 2oct upside on the desk, and the implied levels are extremely attractive (bbg screen below) … small cap (iwm) implied vols have fallen to 5 year lows into a tightening cycle – there is something to do there in both vol (+iwm/-spy) and delta terms … on that, i like going long qqq vs short iwm as i’m not sure breadth widens into year-end and higher rates hurts small caps … long cybersecurity as a theme (ticker gstmtcyb), as callahan puts it “long data infra or cybersecurity is starting to feel like the long ‘ai-capex trades’ in 2024-2025” … that basket is +60% ytd

as mentioned above, the cost of the right tail in index continues to contract… lookback options start to look very attractive in this environment … the lookback guarantees to “sell the top” on any trading session between now and ~year-end for an extra 60-100bps vs the vanilla … we can trade these on sector ETFs and single stocks … you can add a contingency to cheapen the structure (ie, 10y SOFR higher)

// spx 3 month 95% lookback put costs 1.8% (vanilla 95% @ 1.25%)