"At this point, we think it would be a mistake to dismiss the possibility of a Lehman-like shock as a mere tail risk," says Nomura strategist Masanari Takada.
The market plunge could arrive as soon as late August, Nomura predicted, as trend-following algo traders still have many bullish trades to unwind. This view is much more catastrophic than the rest of Wall Street with most firms predicting a stock market correction at most and likely just a slight pullback. Nomura is basing its view on data showing hedge funds fleeing the market and said more are set to exit when their algorithms are triggered by rising volatility.
"At this point, we think it would be a mistake to dismiss the possibility of a Lehman-like shock as a mere tail risk," Nomura macro and quant strategist Masanari Takada said in a note on Tuesday. "The pattern in US stock market sentiment has come to even more closely resemble the picture of sentiment on the eve of the 2008 Lehman Brothers collapse that marked the onset of the global financial crisis.
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Source: CNBC - 🏆 12. / 72 Read more »