“Three weeks, three different continents.”

That’s what Charlie McElligott’s been up to recently. Beats my “three months, three different states,” but then again I don’t fly, so I’m at a hopeless disadvantage when it comes to continent-hopping.

Upon settling back down in front of a stationary Bloomie, Charlie’s “chief observation” was the “substantial loss of legacy cross-asset momentum.” “It all starts with the squeeze in bond shorts,” he wrote Tuesday, noting that last week’s hot CPI-PPI series stateside was a profit-taking opportunity for crowded USD rates shorts. (ZROZ remains ~+8% from my humiliation trade piece, thank you very much.)

Drilling down on the “within-equities” story, McElligott recapped last week’s (neo)cloudy chipwreck.  In stocks, the momentum reversal “was kicked off by perceived AI negative catalysts, with legacy positioning getting rekt on Anthropic’s ARR trajectory and [data center] financing cost concerns,” he said, adding that Tuesday’s Elice debacle didn’t help.

In his latest, SocGen’s Andrew Lapthorne likewise remarked on the momentum reversal, noting that if you rank the stocks in the MSCI All-Country World Index by trailing 12-month price momentum, a portfolio of the top 5% rebalanced monthly plunged nearly 20% last week. See the figure on the left, below. You can see just from eyeballing the chart that the next tier of momentum stocks (the red line) suffered far less.

As Lapthorne explained, “the damage was largely confined to the very top tier of momentum stocks, suggesting investors have become heavily concentrated in an exceptionally narrow group of winners.”

Editorializing around the figure on the right, Lapthorne called the scale of the crowding “striking.” Out of nearly 2,000 stocks in the index, fewer than 100 “account for around a quarter of all daily USD trading volume,” he wrote.

Note how the solid black line (i.e., global semis) in the chart has converged with the dashed red line.  “This is fundamentally a semiconductor and AI story,” Lapthorne said. “When so much trading activity is concentrated in such a small corner, sharp swings between ‘AI ON’/’AI OFF’ will continue to be a feature of today’s mono-thematic market.”