A JP Morgan analyst was out with a somewhat generic warning in the middle of the week. Warning that excessive crowding in the market’s best-performing stocks raises the risk of an imminent correction:
- “It just might come one day out of the blue. This has happened in the past, we’ve had flash crashes”
He described the process:
- “One big fund starts de-levering some positions, a second fund hears that and tries to re-position, the third fund basically gets caught off guard, and the next thing you know, we start having a bigger and bigger momentum unwind.”
Says much of the positive news is discounted already:
- “A lot of goodies have gotten priced in”
- sees few sources of upside surprise beyond Nvidia and the prospects for AI innovation. “That source of upside surprise is becoming more and more limited, and on the flipside, you do have more risks that are hovering in the background,”
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The challenge is the timing. Only Thursday was this:
FOMO is ruling right now.
