Stock market investors beware: a stock rally unwinding could come with no warning, according to JPMorgan’s chief global equity strategist Dubravko Lakos-Bujas.
In a webinar on Wednesday, Lakos-Bujas warned that the extreme market crowding in the current equity rally has positioned stocks for a sharp correction. He emphasized that the concentration is so high that if one large fund begins pulling out, it could trigger a broad market fallout.
Lakos-Bujas painted a grim picture of what could happen, stating that a simple de-leveraging by one fund could set off a chain reaction where other funds try to re-position themselves, leading to a larger momentum unwind.
The cracks are already starting to show, with tech giants Apple and Tesla experiencing significant slides in their stock prices. Both companies, part of the leading “Magnificent Seven” stock cohort, have seen double-digit declines year-to-date.
According to Lakos-Bujas, the level of crowding in the market today has only been seen three times since the 2008 crash, often preceding a correction. He urged investors to start diversifying their trades to avoid being caught on the “wrong side” of any potential correction.
As investors continue to chase big, quality names, the warning from JPMorgan’s strategist serves as a reminder to stay vigilant and prepared for any sudden market shifts.
