The Zhitong Finance App learned that Nomura strategist Charlie McEligott (Charlie McEligott) said that the decline in traditional cross-asset momentum is triggering a round of “reverse dispersion” in the global market — the squeeze of shorting bond positions and a negative catalyst on AI, triggering a large scale of capital rotation to underallocated value stocks and small-cap stocks.
McAligot wrote in a report on Tuesday that Momentum Factor's liquidation was triggered by factors seen as a “negative catalyst” for AI, and traditional AI positions were “hit hard” due to concerns about Anthropic's annualized recurring revenue (ARR) trajectory, questions about the sustainability of CoreWeave (CRWV.US) and neocloud (neocloud), and rising financing costs.
The weak performance of South Korea's Xinyun IPO intensified this round of sell-off, and broader capital flows to reduce total exposure also played a role — the defensive sector and those with both short and low bids in economy-sensitive cyclical value stocks outperformed popular long positions.
McAligot pointed out that this round of reversal began when crowded bond bears were squeezed: the decline in US bond yields began “to awaken a potential 'reversal' in various assets, from 'anti-dollar' foreign exchange to small-cap/value stocks (any non-AI asset).” Reports about possible progress in the Iran deal add further momentum, driving lower energy prices and higher bonds — this fits the upward scenario McAligot called “Trump wants to reach an agreement before the midterm elections.”
The report said that under the impact of the reduction in total exposure, the net exposure of leveraged funds to stocks has fallen back to the low level of one, three, and five years. Meanwhile, buyer investors seem unwilling to miss the year-end market: data as of Friday showed that demand for call options soared to the 100th percentile for individual stocks and the 98th percentile for exchange-traded funds (ETFs) — a “stock substitution” operation where investors bought cheap upward options while reducing their exposure to the underlying asset to preserve participation.