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Nomura’s McElligott On Monday Momentum Massacre: ‘One Of The More Stunning Trades In Modern Market History’

"And yet HILARIOUSLY, Joe Schmoe retail investor looking at simple Index returns wouldn't have had ANY idea of the calamity occurring".

Monday's historic Momentum unwind showed up in some of the European equities price action on Tuesday as top-performing sectors sold off. "We can call it cracks in the momentum story, as a lot of the highflyers are being sold while the laggards are being picked up", Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, told Bloomberg in an e-mail. He flagged "similarities" with what happened in the US to start the week. As a reminder, Monday's factor reversal was dramatic. Indeed, "dramatic" is wholly insufficient as an adjective when it comes to describing how anomalous it was. Read more: Massive Momentum Factor Unwind Triggers ‘Epic’ 7 Z-Score Performance Bleed Nomura's Charlie McElligott was all over it. Before the bell, he flagged the potential for a continuation of a recent multi-day move in his “Pain Trade” index, which he explained is just the “simple ratio of a ‘Value’ factor proxy versus Momentum'”. Hours later, he sent out another quick blast which described what was taking place below the hood in US equities. The action, documented here in real-time (see the linked post), was also picked up by Bloomberg, which quoted Charlie in a short piece
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7 comments on “Nomura’s McElligott On Monday Momentum Massacre: ‘One Of The More Stunning Trades In Modern Market History’

  1. Ria says:

    Yet most of the economic metrics indicate a continued gradual slowing of the economy…..bonds clearly rallied too fast and too hard but this does not necessarily indicate a long term trend.

  2. derek says:

    It’s funny how the economic narrative is suddenly changing to match the market action.

  3. Peter says:

    “By the afternoon, though, the unwind clearly escaped from the lab, ran out the castle doors and charged down the hill into the village.”
    That is the single best sentence I have read in any market commentary ever.
    Thank you.

  4. Anonymous says:

    Nice to see. I was waiting for this since early August, accumulating value stocks.

  5. nostradamus jr says:

    The 2-yr yield still suggests that the Fed Funds Rate will be down another 1/2% this time next year, so not sure we will see an equity explosion that has stability, but time will tell.

    https://fred.stlouisfed.org/graph/?g=oPgN

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