Monday, April 28, 2014

What risk unwind?

In a recent post, I postulated that the carnage in momentum stocks was a case of risk exhaustion (see A case of risk exhaustion?). Fast and institutional money had gotten overly long risk across the board (e.g. high yield, momentum stocks, etc.) and they were in the process of unwinding the trade.

I then came upon the Barron's Big Money Poll from the weekend, which had a number of eye popping results.

First of all, money managers were more bullish on stocks than their clients (55% manager bulls vs. 31% client bulls). More notably, the most favored sector was Technology, which has gotten creamed lately, while the least loved was Utilities, which has become the new sector leadership as stocks have wobbled.

What risk unwind? If institutions are indeed de-risking, then we have a long, long way to go.

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. (“Qwest”). The opinions and any recommendations expressed in the blog are those of the author and do not reflect the opinions and recommendations of Qwest. Qwest reviews Mr. Hui’s blog to ensure it is connected with Mr. Hui’s obligation to deal fairly, honestly and in good faith with the blog’s readers.”

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Unknown said...

You are assuming that money managers have never been wrong about risk. Will you ring the bell when they are wrong?

Cam Hui, CFA said...

You misunderstand. If the risk unwind was because of institutional managers and fast money hedge funds de-risking, then the survey shows that they are very far from being done.

Anonymous said...

Means there is a chances in the near future that the market will collapse?