Just a month ago, Goldman Sachs’ head prognosticator David Kostin went full bulltard, telling clients to buy high-beta, high-momentum stocks because (paraphrasing) “hedge funds suck” and will need to play catch-up. Today, his tune has changed. The “dash-for-trash” meme has outperformed dramatically in the last few years as Fed experimentation breathed life into the zombie-est weak-balance-sheet companies and traders rode that artificial wave. However,as Kostin notes, tightening financial conditions have the greatest impact on firms with high leverage and weak balance sheets; and thus, with the Fed more biased towards tightening than loosening (and the market discounting that), the “dash-for-trash” is over (as we noted in July).
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The “Dash-for-Trash” trade has worked well.. until recently
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Via Goldman Sachs’ David Kostin,
