Stock market: Crowded Trades do not work

Posted: February 22, 2016 in Uncategorized

I always tell you that the last two years crowded trades (the trades where the majority of people agree upon) are not working.

I found a nice study, apart my own, from UBS that shows what I mean and where the dangers lurk.

The main crowded trades are LONG USD, US Healthcare (unwinding since August 15), Japan Telecom, Asian IT.

Another is Short Energy, Short Gold and Commodities in general (and commodities countries such Brazil, Russia and naturally Australia and Canada)

A big one yet to materialize is the current LONG Developed Market Short Emerging Markets (will have to see the USD strenght to see…but hard to pick) and Large Cap vs Small Cap.

Another big trade is Indexing…with everybody going towards Exchange Traded Funds.

What does it mean? Let’s see years to date (local currency):

ASX -6.1%

ASX Financials -10%

ASX Energy -4.6% (surprise!)

US SP500  -6.6%

Gold +16%

Oil -20%

Iron Ore +9.6% (surprise!)

 

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