Stock market's hottest trade most volatile since 2008, how to invest - Business Insider

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MORGAN STANLEY: The market's hottest stocks are in danger of being disrupted to a degree not seen since the Great Recession. Here's how to adjust your portfolio for the coming shift.

Traders watch the price of X Financial, a Chinese technology personal finance company, following the company's IPO on the floor of the New York Stock Exchange in New York, U.S., September 19, 2018.So-called momentum stocks that are popular because of their persistent price gains are trading with their highest volatility since the 2008 financial crisis, according to Morgan Stanley.

Morgan Stanley strategists highlighted two pair trades that have been performing well since the stock market hit rock-bottom in March.Investors who actively pick individual stocks and those who passively mimic preexisting indexes share one thing in common despite their differences. caused by the coronavirus crisis, the hot momentum strategy is now at its most volatile since the 2008 recession according to data compiled by Morgan Stanley. The firm's equity strategists concluded this by analyzing the 30-day volatility of a strategy that bets on the biggest winners over the past year and against the biggest losers in the same timeframe.

For further proof of the shift underway, Wilson noted that the volatility of growth stocks relative to"What's unusual about the past month is the extreme spike in these momentum strategies and that tells us investors need to be on high alert that the rotation of the past few weeks is the beginning of something more sustainable," Wilson said in a recent note.

 

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