While the fallout from the historic plunge from the Turkish Lira remains to be seen and its contagion across global markets has investors on edge, there are a few historical precedents that give insight into the potential future path for the Turkish Lira. In particular, Turkey’s currency crisis has a few historical parallels to the Asian Crises of 1997 which beset many Asian countries and ultimately ended up needing IMF support to stabilize their currencies. With a maligned monetary policy and economic direction, there are bound to be a few more bumps in the road with high volatility before the path for the Lira improves. By delving into what transpired in historical crises, we can gain introspection into what can transpire in the future.
Knowing large positioning changes is very important in identifying the next trading opportunity, as some might be fundamental-driven and thus lasting longer while others might be tactical-driven and therefore short-lived. According to CrowdThnk’s consensus positioning measure, here are the 10 stocks that have seen the largest positioning since July 2018:
While Nasdaq investors have experienced a bumper year for their investments, bolstered by outperformance of the likes of Netflix, Amazon and Microsoft, value investors have had a tough time finding outperformance in a market beset by historically high valuations, one of the priciest in history. CrowdThnk’s positioning data reveals that positioning is once again near the extreme overweight side of the spectrum, especially amongst outperforming Tech and Consumer Discretionary sectors. With a clear decline in breadth amongst advancers in the S&P – only 8 stocks account for 100% of the price gains in the index this year – the market is looking increasingly like the late stages of the stock market cycle. Most late-cycle stages typically end with a melt-up higher in the most attractive asset class and with a return of +13% YTD, the Nasdaq fits that description, benefitting from investor inflows that have shied away from assets such as Emerging Markets and Bonds. However, with the increased uncertainty surrounding an impending Global Trade War, even the most casual market observer must question whether these lofty valuations are sustainable or if we’re heading for a market correction. A look into historical late-cycle, bubble episodes can give us an insight on where we are in the cycle and where we could potentially go from here.
It is very important to identify crowded trades in the stock market as an overcrowded or under-positioned stock may demonstrate distinct, predictable probabilities in terms of future price action. Based on CrowdThnk’s consensus positioning measure, here are the current 10 most crowded trades in the stock market:
As the Trade War tension heats up this summer, another type of battle is playing out on the soccer field at the World Cup. While the tournament started with 32 teams, the field has narrowed down to the final two – France and Croatia – in a clash for supremacy. While fans across the world are in a frenzy, the economics of the sport suggests there’s more on the line than simple pride and joy. Looking at data over the past 40 years, World Cup Champions tend to provide an immediate, short-term economic boost to a winning nation’s economy.
Since the Great Financial Crash of 2008, assets have soared in value as global central banks have increased balance sheets, effectively pouring money into the markets. Over the past decade, assets from stocks to bonds have benefitted from this rising tide of money such that portfolio values have gained tremendously across a continuum of assets. One such strategy that has continued to post stellar returns is the Risk Parity Strategy, leading to massive inflows over the past decade. Risk Parity is a portfolio allocation strategy using risk to determine allocations across various components of a diversified investment portfolio within a given level of risk. This strategy has been tremendously popular, garnering and estimated $400 billion of investments.