2023-06-07 16:48:00
2023’s favorite trades are likely to collapse on Wall Street. The new coronavirus has dealt another blow to market professionals who have been caught off guard repeatedly since the pandemic.
As we enter the middle of the year, the U.S. economy has bounced back from bearish recession fears, and the artificial intelligence (AI) frenzy is heating up.
Strategies that are failing include selling big tech stocks, avoiding the dollar, and hoping for emerging-market stocks as China recovers from the coronavirus pandemic. Instead, U.S. growth stocks were on the verge of a full-blown meltup, and Chinese stocks sank into bear market territory. Far from falling, the dollar has risen, surging regarding 6% once morest the yen.
Even those who had expected stocks to underperform bonds were tripped up. The MSCI/ACWI index of global stocks is up 10%, while the Bloomberg index that tracks global bonds is up 1.4%.
It’s another example of Wall Street’s irrelevance, baffling sell-side strategists and macro hedge fund managers. With unending inflation and a 2022 bear market, it’s been extremely difficult to track investment and economic trends over the past three years.
“Investors underestimated the growth potential of the U.S. economy and overestimated the pace of China’s recovery,” said Mark Freeman, chief investment officer at Socorro Asset Management. “AI, which was off the radar at the time, is now easily the biggest market mover,” he said.
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