Pain Trades: Nomura Outlines Three Catalysts for Crowding Reversals

Nomura's Charlie McElligott outlines three catalysts—geopolitical (No Deal/Real Deal) and structural (Reflexivity)—that could trigger a major reversal in the currently crowded AI and Energy trades.

Key Takeaways

• 1.Macro consensus is heavily crowded in higher rates and the 'AI Semis-Energy 50/50 Barbell' trade, which has significantly outperformed the S&P 500 YTD.
• 2.A 'No Deal' scenario in oil/energy could trigger an inflation supply shock, forcing central banks into a hawkish pivot that shocks cross-asset volatility.
• 3.A 'Real Deal' on Iran could ironically cause a sharp reversal by collapsing the inflation tail, causing yields and the USD to fall, favoring underowned cyclicals over AI tech.

Table of Contents

• Economic Quadrants
• THE PERFECT PICTURE OF THE STOCK MARKET ZEITGEIST: THE ONLY TAIL WE FEAR IS THE "RIGHT-TAIL CRASH UP" IN THE AI TRADE
• 1) No Deal
• 2) A Real Deal
• 3) Reflexivity
• So, What's The Tell?
• What Could this look like?
• Cross-Asset Crowding: Trends & Reversals

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