For months, JPMorgan's Marko Kolanovic has argued that a rotation away from absurdly crowded defensives and momentum names and into value and cyclicals was in the cards.
That rotation came calling in early September, when bond yields rebounded off the rock-bottom levels hit in August, catalyzing one of the most dramatic factor rotations in recent memory. That played out just below the market surface, and produced a series of multi-standard deviation events which flew under the radar for anyone not willing to “look under the hood”, as it were.
As documented here on any number of occasions, the inexorable decline in bond yields is reflected in equities. As yields declined over the post-crisis period and central banks persisted in accommodation, investors crowded into bond proxies and other expressions that are tethered, in one way or another, to the vaunted "duration infatuation". That's effectively embedded "bond risk everywhere", to quote SocGen's Sandrine Ungari.
Read more: Armageddon Scenarios, Willful Ignorance And ‘Bond Risk Everywhere’
Well, this week, bonds sold off dramatically and that's going to have serious implications across styles and sectors in the equity
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