24-07-2025
Wall Street Insiders Are Quietly Hedging -- Should You Be Worried?
The market's on fire. The S&P 500 (SPY) has surged 28% since April 8, volatility is near its lowest level of the year, and earnings season is mostly upbeat. Feels calm. Too calm. Behind the scenes, trading desks at Goldman Sachs and Citadel Securities are urging clients to pick up protectionwhile it's still dirt cheap. According to Goldman, the cost of hedging against a 10% drop is now the lowest it's been since January. If you are nervous, the market is making it very easy to rent hedges, their team told clients Monday. At a time when everyone's buying stocks, Wall Street's most tactical desks are buying insurance.
Warning! GuruFocus has detected 6 Warning Signs with XKRX:373220.
Why now? Because the next two weeks could get messy. The Fed announces its interest rate decision on July 30. Two days later, President Donald Trump's tariff deadline hits. And on the same day: the July jobs report drops. These aren't just headline eventsthey could shake the entire risk-on mood. BofA's John Tully is telling clients it's time to buy volatility, recommending S&P 500 puts expiring Aug. 22. JPMorgan's Ilan Benhamou suggests shorter-dated options that expire Aug. 1, covering both the jobs data and Trump's potential tariff news. Nvidia (NASDAQ:NVDA) earnings are also on deck, which could swing sentiment even further.
Even if nothing breaks this week, some pros say this rally might be running out of road. Citadel's Scott Rubner sees institutional exposure creeping toward overextended levels. That's usually when the smart money starts pulling back. Rubner thinks now is the time to rotate into September hedgesbefore macro risks (and historical patterns) catch up. For context: September has been the worst-performing month for U.S. stocks since 1928. So while the headlines are still glowing, desks that manage billions are getting defensive. The playbook? Use the calm to buy protectionbefore the storm shows up.
This article first appeared on GuruFocus.
