(MarketWatch) Wall Street is about as jammed with crowded trades as it’s ever been — retail guys, mutual funds and hedgies all loading up on the same, high-profile investments, according to Bank of America Merrill Lynch.
When it works out as planned, like it has for years now, everybody wins, and the bull keeps flexing. So what happens when things go sideways? Well, obviously it’s been awhile, but if Kent Engelke of Capitol Securities Management, finally hits his mark, we could find out sooner rather than later.
Engelke told the Wall Street Journal that he’s been “miserable” in recent years because he’s avoided popular technology names like Apple, Amazon, Netflix, and Alphabet, opting instead for what he believed to be undervalued corners of the market.
In retrospect he should have jumped on the bandwagon with everybody else.
But, in our call of the day, he’s not budging from his bear stance.
“The last three years have been among the most difficult ever out of 33 in the industry because we haven’t owned FAANG [Facebook, Apple, Amazon, Netflix and Alphabet’s Google]” he said, adding that he’s convinced the rally could fall apart if the Fed disappoints with its rate cuts.
He warned we then might see “a really big, ugly selloff.”
Such a move could happen as soon as this week, if the Fed doesn’t deliver Wednesday a quarter-point cut. That is, of course, unlikely, but if economic data keeps coming in strong and earnings show a clean bill of health for Corporate America, the path to lower rates the rest of the year could get muddied.
Nothing “big” or “ugly” so far this morning.
