Institutional Insights: View From The Goldman Sachs Trading Floor

According to Goldman Sachs traders 'NDX-1.7% and SPX-89bps, a ton of questions on the move lower...market traded quite squirrelly into tomorrow's Jackson Hole with vol going bid for the fourth consecutive day this week. Think this speaks perfectly to the anxiousness out there, given Powell’s past remarks at Jackson Hole have mattered...and markets have moved on it. The market clearly has tomorrow priced as a real event with the one day straddle currently close to 1%. SPX has been up 9 of the last 10 days and our flow has shown length being added in pockets of market that had been unwound in the RTY > SPX trade in July.We expect Powell to express a bit more confidence in the inflation outlook and to put a bit more emphasis on downside risks in the labor market than in his press conference after the July FOMC meeting, in light of the data released since then. A dovish surprise could be any hint that the level of the funds rate is inappropriately high, while a hawkish surprise could be highlighting instead that broad financial conditions are still quite easy. Yields rebased 5-8bps higher across the curve on the back of this& largely in-line jobless claims / fed commentary: *HARKER: CONTINUE TO WORRY ABOUT SHELTER INFLATION

We've seen less persistent vol demand today than we have over the rest of the week when flows seemed to justify the vol bid. Today, it's trading a bit more like a 2017 vol environment (though with a larger realized range) where vol goes bid on moves lower (without fixed strike SPX option demand), and then immediately gets taken lower on bounces in spot. We would continue to own vol here, particularly in October SPX options where we think the risk/reward is tilted in favor of owning options.'