'This bubble will likely collapse': JPMorgan sounds the alarm on a hugely popular trade that's twice as overstretched as it was before the dot-com crash
, JPMorgan's global head of macro, quantitative, and derivatives strategy, who expected that the shift to value would persist into Q1 2020.
He had identified a gulf between value's lag on one hand, and the outperformance of factors including momentum — which lifted many fast-growing technology stocks — and low volatility. Kolanovic even called the expected convergence between these factors a "But the gap has only gotten wider since last July and is now twice as large as it was during the dot-com boom. Value is still out of favor, while low-volatility and momentum-driven technology stocks are all the rage.
"We caution investors that this bubble will likely collapse, i.e. this time is not 'different', with valuations reverting closer to 2010-2020 average," Kolanovic said in a recent note to clients. Kolanovic went further than declaring an "equity factor bubble" to explain what is behind its expansion.
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