JPMorgan warns of crowded trades amid markets’ ‘clear consensus’

JPMorgan warns of crowded trades amid markets’ ‘clear consensus’
Strategists from top financial services firms expect a risk-on environment into 2021 as the global economy recovers from the impact of COVID-19
DEC 07, 2020
By  Bloomberg

There’s strong consensus in markets right now and investors need to position to hedge against crowded trades, according to JPMorgan Chase & Co.

The last time such a strong agreement on strategy existed was in late 2017 and early 2018, and that time period serves as a reminder that such a consensus view rarely plays out in its entirety, strategists led by Nikolaos Panigirtzoglou wrote in a note Friday. Global stocks reached records in January 2018 amid massive inflows, but extended positioning in risk assets became a concern and the next month the “Volmageddon” volatility spike crushed trades that many investors had viewed as a sure thing.

“For asset allocators, what is thus important is scale exposures to avoid an overly concentrated portfolio,” according to the report. “One way of scaling exposures to the consensus trading themes is by limiting exposure to the most crowded ones.”

Strategists from firms including JPMorgan, Goldman Sachs Group Inc. and Morgan Stanley expect a risk-on environment into 2021 as the global economy recovers from the impact of Covid-19. Positive news on vaccines has bolstered the idea. With central banks and governments pumping in stimulus to counter the pandemic, many see the makings of a bumper period for assets such as high-yield debt, emerging-market currencies and value stocks.

For JPMorgan, those crowded trades include: short the U.S. dollar versus cyclical developed-market currencies, long copper and long Bitcoin. On the other hand, bullish positions on oil and gold are less crowded, as are overweight emerging-market equities relative to developed ones, according to the report.

Still, medium-term equity positioning appears to be average rather than overbought, the strategists said.

“Any equity correction in the near term would represent a buying opportunity,” they said. “We are only in the middle of the current bull market.”

Latest News

Northern Trust names new West Region president for wealth
Northern Trust names new West Region president for wealth

The new regional leader brings nearly 25 years of experience as the firm seeks to tap a complex and evolving market.

Capital Group extends retirement plan services further with a focus on advisors
Capital Group extends retirement plan services further with a focus on advisors

The latest updates to its recordkeeping platform, including a solution originally developed for one large 20,000-advisor client, take aim at the small to medium-sized business space.

Why RIAs are the next growth frontier for annuities
Why RIAs are the next growth frontier for annuities

David Lau, founder and CEO of DPL Financial Partners, explains how the RIA boom and product innovation has fueled a slow-burn growth story in annuities.

Supreme Court slaps down challenge to IRS summons for Coinbase user data
Supreme Court slaps down challenge to IRS summons for Coinbase user data

Crypto investor argues the federal agency's probe, upheld by a federal appeals court, would "strip millions of Americans of meaningful privacy protections."

Houston-based RIA Americana Partners adds $1B+ with former Morgan Stanley director
Houston-based RIA Americana Partners adds $1B+ with former Morgan Stanley director

Meanwhile in Chicago, the wirehouse also lost another $454 million team as a group of defectors moved to Wells Fargo.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.