NEW YORK - Whatever else it signifies, and it may not be much, considering what happened the last time stocks did this, Thursday's plunge in US equities was vindication for bearish strategists whose voices had been getting louder.Warnings that valuations were out of control and investors would pay for their euphoria have been swirling around for weeks amid a stretch in which the S&P 500 went 30 sessions without a 1 per cent decline.
"While there was no one trigger, there's probably some nervousness and squaring up of positions heading into a long weekend," said Samana, the firm's senior global market strategist.To be sure, that's all it was on June 11, when the S&P 500 lost 6 per cent. Its return since then is about 15 per cent, even with Thursday's dramatics.
"At some point, you're bound to see some profit-taking and re-positioning within portfolios," said Adam Phillips, director of portfolio strategy at EP Wealth Advisors. But if that so-called"short gamma" hedging lifted stocks, logically it should also be capable of exacerbating moves the other way. When shares fall, market makers are likely to unwind hedges at an increasing speed, spurring more losses.
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