The Momentum Trade Is One Ceasefire Away From Total Carnage

Momentum is seeing a historic 57% YTD surge driven by Nvidia, but extreme positioning and an all-time high 'Dirty Sharpe' ratio signal high risk. A macro-driven rally in 'losing' stocks could trigger a massive momentum reversal.

Key Takeaways

• 1.Momentum is experiencing its best start to a year in over a decade, with high beta momentum up 57% YTD.
• 2.Nvidia is the primary driver of the momentum factor, having gained $900 billion in market cap in just seven trading days.
• 3.The primary risk to the current momentum trade is a rotation where 'losers' (the short leg) start to rally, rather than just the 'winners' crashing.

Table of Contents

• Momentum's monumental year
• Driving it
• Everyone is all-in
• Winners gonna win win win
• High realized vol
• Drawdowns
• Dirty Sharpe
• The real risk

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