Crowded trades is a term for where multiple investors pour money into an asset or trading strategy while the supply/counterparty is limited.

In the world, the phenomenon of "crowded trades" also occurs frequently, the most remarkable point is the "flight to US Treasuries" (capital flows strongly pouring into US bonds) which occurred at the end of 2008, leading to the phenomenon of negative yields. . In Vietnam, there is also an example that the gold price skyrocketed in November 2009, while many short sellers were forced to close their positions, many people rushed to buy physical gold, but the supply was limited because the gold was lost. prohibit import.

According to JPMorgan Chase & Co., the market currently has a strong consensus and investors need to take hedge positions against crowded trades.

The last time such a strong consensus (strategically) existed was late 2017 - early 2018, and the time period reminds us that it happened very rarely. The bank's strategists, led by Nikolaos Panigirtzoglou wrote in a note Friday last week. Global equities hit a record in January 2018 amid massive cash inflows, but position expansion in the risky asset class became a concern for the following month, and volatility The sudden increase has "crushed" many investors that (increasing the position in risky assets) is a sure thing.


“For property distributors, it is important to allocate ratios to asset groups, to avoid an overly concentrated portfolio,” the report said. One way to extend the allocation (capital) into transactions that are supposed to have high consensus is to limit allocation to arrays that are crowded with transactions. ”

Strategists from giant financial institutions include JPMorgan, Goldman Sachs Group Inc and Morgan Stanley's expectations for a “risk-on” environment by 2021 when the global economy recovers from a recession caused by the Covid-19 pandemic. With central banks and governments aggressively pumping money into the economy through stimulus measures to minimize economic losses, many assume that there will be a period of bounty for assets such as debt benefits. yields, emerging market currencies, and value stocks.

According to JPMorgan, those crowded trades include:
  • Short selling of USD against developed market currencies;
  • Buy Bitcoin;
  • And buy in copper metal;
In addition, bullish positions for oil and gold are also crowded trades but at a lower level, in addition, they are also an overestimation of emerging market stocks compared to developed markets. However, medium-term positions appear to be moderate rather than overbought.

JPMorgan added that any correction in the stock market in the near future will be a buying opportunity, and we are just in the middle of the current bull market.