RBC Warns “Beware ‘The April Effect’… Risk Of A Nasty ‘Double Whammy'”

 

  • RBC’s head of cross asset strategy Charlie McElligott dons his full wonksh equity analyst hat today, exposing “The April Effect,” and the specific risk of “nasty double whammy” of levered long-short unwinds should momentum stall.
  • Quick note of warning as we transition into the new quarter, with potential for major thematic / sector / factor reversals in stocks.  The following observation regarding April seeing a seasonal ‘momentum’ factor market-neutral strategy unwind is ‘equities wonk-ish,’ but with real potential cross-asset impact.  As we know, the Fed watches equities because there are potential implications with regards to broad US ‘financial conditions’ on consumer and economic confidence.  Thus, the scale of potential equities volatility does matter across macro, especially in light of general buyside portfolio ‘crowding’ / ‘high beta’ exposure (into ‘growth’ right now especially) which could exacerbate the dynamic.

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Source: zerohedge.com

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