The Most Crowded Trade – The Duration Crisis:
- The light blue line shows the correlation between value stocks and the US Long Bond
- The navy blue line shows the correlation between growth stocks and the US Long Bond
- Until recently, both VALUE & GROWTH have historically carried very similar correlations to the performance of the long bond
- As documented in our papers here, here and here, many growth stocks today are highly speculative and the public is “all in”
- These growth stocks now rise when bonds rise at a time when bonds are as expensive as any time in 40 years
Kailash believes investor crowding into growth stocks and yield-less bonds is creating a “duration crisis.” Our paper next week explains the problem and launches a sophisticated tool generating duration statistics for equities.
Important to note: Kailash believes this is one of the most significant papers and tools we have launched in our decade+ of research. If you would like to review the work and preview the tool upon release please click here.
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