JPMorgan Warns Crowded Trades and Euphoric Consensus are the Biggest Threats for Markets
The comments below are an edited and abridged synopsis of an article by Tyler Durden
The ‘long equities’ theme is not only the most crowded it has ever been among hedge funds, sporting record gross and net leverage, but it’s also extremely crowded tactically with elevated positioning by momentum traders and rebalancing flows by balanced mutual funds and pension funds, all of which poses downside risk into year end.
But since no one can get away from the herd—even when you’re warning about the risks of running with the herd (if you want to make money by selling ideas to the herd)—JPMorgan warns that this time is different from the euphoria that began in 2018, when we last saw such massive, one-sided positioning, and so JPM writes that its “medium-term equity positioning indicator based on the implied equity allocation of non-bank investors globally stands at average rather than overbought levels.”
Which means that, just like Morgan Stanley, JPMorgan’s advice is to mind the sharp imminent correction, but to promptly buy the dip, i.e., “any equity correction in the near term would represent a buying opportunity, as in our opinion we are only in the middle of the current bull market.”
Considering that we are now in the phase where there is no stopping the money helicopter that is central bank balance sheets, JPMorgan is probably correct; any dips from this point on have to be bought ahead of the coming hyperinflation, at least until such time as fiat currencies and conventional economics finally lose all credibility, which will mark the merciful end of this Sovietization of what was once called the ‘market.’