Want to know one of the biggest risks in equity markets right now—parity, and we don’t mean between asset classes, we mean between investors’ portfolios. Momentum buying, or buying up stocks that have performed the best, has become such a hot strategy this year that both mutual fund holdings and hedge fund holdings look very similar. Everyone has the same basket of stocks, such as Mastercard, Paypal, Amazon, and Microsoft.
FINSUM: Since value investing has all but died—no one is interested in undervalued stocks—portfolio parity is increasing. This seems like a big risk that will magnify a reversal.