The Silence Before the Policy Storm
Liquidity is drying up. Volatility is cheap. The smart money is moving before the central banks speak. On January 24, Goldman Sachs signaled a tectonic shift in how institutional desks handle global equity risk. Rich Privorotsky, the head of European One Delta trading, is currently navigating a market defined by policy anxiety. Investors are no longer just watching the tape. They are repositioning for a regime change in global liquidity.
The term One Delta refers to products with a linear relationship to the underlying asset. Think ETFs, swaps, and futures. When Goldman’s One Delta desk speaks, it reflects the raw positioning of the world’s largest hedge funds and pension managers. They are currently rotating out of overextended US tech names. They are hunting for value in the European periphery. This is not a speculative whim. It is a calculated response to diverging fiscal paths between Washington and Brussels.
The Divergence of Central Bank Mandates
Inflation is sticky. Growth is uneven. The Federal Reserve remains hawkish while the ECB faces a stagnation trap. According to recent data from Bloomberg, the spread between US and German 10-year yields has widened significantly in the first three weeks of January. This creates a massive carry trade opportunity. Privorotsky notes that the appetite for European equities is growing because the valuation gap has reached a decade high.
US equities trade at a massive premium. The S&P 500 price-to-earnings ratio is stretched thin. Conversely, the Euro Stoxx 50 offers a dividend yield that dwarfs the Treasury’s risk-free rate. Institutional investors are using delta-one instruments to gain exposure to this spread without the complexity of options Greeks. They want pure, unadulterated beta to the European recovery. If the ECB cuts rates in the first quarter, these positions will print money.
Institutional Positioning by Sector as of January 24
The Mechanics of the One Delta Shift
Hedging is expensive. Direct ownership is capital intensive. One Delta desks provide the middle ground. Large institutions use these desks to swap out of domestic risks. They are looking for policy-sensitive sectors. Goldman is seeing a surge in demand for European banks and industrial conglomerates. These sectors are the primary beneficiaries of the proposed EU infrastructure funds. Per reports from Reuters, the inflow into European equity swaps has increased by 14 percent since the start of the year.
The risk is not just economic. It is political. Policy changes in the US regarding trade tariffs are forcing a re-evaluation of global supply chains. European firms with localized production are suddenly attractive. The Goldman Sachs Global Banking and Markets team is focusing on these “policy winners.” They are the companies that thrive when borders tighten and local subsidies flow. The era of globalized tech dominance is facing its first real challenge from localized industrial policy.
Market Performance Metrics
The numbers do not lie. The first few weeks of the year have shown a clear decoupling. While the Nasdaq 100 struggles with high interest rates, European indices are showing resilience. The following table illustrates the performance of key asset classes as we hit the final week of January.
| Asset Class | Price (Jan 24) | YTD Change (%) | Volatility (VIX Equivalent) |
|---|---|---|---|
| S&P 500 Index | 5,782.40 | -1.2% | 18.5 |
| Euro Stoxx 50 | 4,892.15 | +3.4% | 14.2 |
| Gold (Spot) | $2,415.60 | +2.1% | 12.8 |
| US 10-Year Yield | 4.22% | +5bps | N/A |
The volatility discrepancy is the most telling factor. European markets are calmer. This stability attracts the “One Delta” crowd. They hate noise. They love trends. The current trend suggests that the US premium is evaporating. Investors are positioning for a world where the US is no longer the sole engine of equity growth. Goldman’s focus on Chris Hussey and Rich Privorotsky’s insights highlights the urgency of this transition. If you are not looking at European equity risk today, you are looking at the past.
The Regulatory Catalyst
Watch the regulators. The SEC and the ESMA are diverging on transparency requirements for swap dealers. This regulatory arbitrage is another reason for the shift toward European desks. Goldman Sachs is positioning itself as the bridge for US capital seeking shelter in European markets. The technical structure of these trades allows for higher leverage with lower capital charges. This is the hidden engine of the current rally. It is a credit-fueled rotation disguised as a fundamental shift.
The next major milestone for global markets arrives on February 1. The Federal Open Market Committee will release its first policy statement of the year. Every One Delta trade currently on the books is a bet on the wording of that statement. If the Fed signals a pause, the rotation into Europe will accelerate into a stampede. Watch the Euro-Dollar exchange rate as the primary indicator. A break above 1.12 will confirm that the institutional pivot is complete.
