‘Even Short-Lived Rotations Could Be Powerful’: Goldman Weighs In On Momentum Massacre, Factor Turmoil

‘Even Short-Lived Rotations Could Be Powerful’: Goldman Weighs In On Momentum Massacre, Factor Turmoil

"Stretched valuations and over-crowdedness are among the explanations for the moves", Goldman's Alex Meintel and Deep Mehta write, in a note explaining the epic factor rotations and unwinds playing out below the market surface this week. Monday's historic Momentum "massacre" was documented in real-time by Nomura's Charlie McElligott, who followed up on Tuesday with an expansive postmortem, complete with a veritable smorgasbord of his signature annotated visuals. We summarized that instant McEll
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3 thoughts on “‘Even Short-Lived Rotations Could Be Powerful’: Goldman Weighs In On Momentum Massacre, Factor Turmoil

  1. I’d be really curious to see how this week’s factor chart compares to the last four months of 2018. Momentum had a rough run then as well, and the magnitude comparison would be interesting.

  2. yes income oriented low growth stocks and long duration stocks (ie. rapid growth plays with low dividends and rapid but speculative earnings) get hit. the income stocks due to competition with bonds (substitution affects), and the long duration stocks due to discounting rates going down (discounting rate driving current valuations down). bonds are in terrible technical shape due to high issuance in mortgage refi, corporate, sovereign, and muni land right now. expect that factor to burn itself out. what happens after the burnout? well, growth worldwide is challenged and even if the ecb and fed come up short in easing, the direction of growth looks baked in (slowing) especially in manufacturing. a slowing economy is not the environment to focus on cyclicals… unless you are trading with a time horizon of less than 3 weeks this trade is not for you…..

  3. Re: ““this current rotation is unlikely to last structurally if bond yields remain low and growth stays weak””

    As previously mentioned, the (current) 2-yr Treasury proxy for where the Fed Fund Rate will be a year from now, suggests that if anything the market will tread water, chopping up and down, range-bound — perpetual waterboarding, where every spike up will be offset to the downside. That of course will play well with the new world of trump tweetmania, which places a limit on crashes, as well as upward sustained growth. Amen

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