Goldman Sachs High Beta Momentum Basket Falls Over 7% in One of Its Worst Sessions This Year

Goldman Sachs' high beta momentum long basket shed over 7% on Tuesday in one of its four worst sessions in the past year, as the no-fundamentals, high-volatility trades that had been running well ahead of the broader market reversed sharply and in unison.

The selloff came in waves. Goldman's baskets of "high beta momentum longs" and "non-profitable tech" stocks had already been dumped last Thursday, then took another hard leg down on Tuesday. The two baskets, which had tracked nearly in lockstep for two months, fell in tandem: D-Wave Quantum, Planet Labs, and Navitas Semiconductor, constituent stocks that appear in both, were each down more than 2% as of 10:24 a.m. ET.

The logic of the reversal was inseparable from what had driven the rally in the first place. These groups had handily outperformed the S&P 500 for an extended stretch while, by their nature, carrying more hype than actual track records in terms of producing profits for shareholders. Gold, another asset that generates no income, tracked the same breakdown: the SPDR Gold Shares ETF was on track for its biggest daily loss since April 2013 as of 10:28 a.m. ET.

The selling spread into consumer discretionary. Norwegian, Royal Caribbean, and Carnival all fell; Carnival's decline was compounded after the company cut its profit outlook on climbing fuel costs in Friday earnings. Airbnb, DoorDash, and Starbucks, bellwethers less exposed to oil prices, were also sinking.

The macro backdrop provided no support. President Trump extended the Strait of Hormuz opening deadline to April 6, a delay that came alongside what analysts described as Wall Street's biggest loss of the conflict. Market analyst Jim Bianco was unsparing about the diplomatic signaling: "Any further statements by Trump about a deal are white noise to the markets," he wrote in a LinkedIn post on Friday. "Only if the IRANIANS say the talks are going well will it impact markets."

For Goldman desks that had been running these basket positions as core momentum exposure, Tuesday compressed two months of near-identical correlation into a single, simultaneous exit.