Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as a quantitative equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989.

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Thematic (Sector/Industry)

United states / Thematic (Sector/Industry)

Remember the Momentum Massacre? Too many investors were in a crowded short in the stock market. The cautiousness was manifesting itself in the price momentum factor, which was showing up in low volatility, low beta, defensive and value stocks. The crowded short and long momentum trade began to unwind in late August, and accelerated when the SPX staged an upside breakout from its trading range at 2960 in early September.The reversal was dramatic enough that JPM quant Marko Kolanovic called it a “once in a decade trade” (per <a href="https://www.cnbc.com/2019/09/11/jp-morgans-market-guru-say-his-once-in-a-decade-trade-is-upon-us.html" target="_blank" rel="noopener">CNBC</a>). He made the case that both hedge fund and institutional positioning was too cautious, and a short-covering rally would spark a stampede by the slow moving but big money institutional behemoths to buy beta. Moreover, the reversal could also be a signal for a long-awaited turn from growth to value investing.Since then, returns to the price momentum factor has stabilized and begun to turn up again. Our analysis of the returns to differing factors and sectors is revealing of likely future market direction.We find that the combination of a lack of either growth or cyclical leadership and the defensive sectors the only men left standing leads me to conclude that the path of least resistance for stock prices is down.However, we believe downside risk is limited. We stand by our analysis outlined a report published in early August (see <a href="https://humblestudentofthemarkets.com/wp-content/uploads/2019/08/20190805-Powells-dilemma.pdf" target="_blank" rel="noopener">Powell’s Dilemma (Why It Matters)</a>) where we had projected S&amp;P 500 downside risk of 2591–2891, with the mid-range at 2738. The subsequent market weakness pushed the index into the upper end of that range. Current conditions suggests that the valuation is incomplete.In conclusion, downside risk is well within the normal parameters of equity risk. The maximum projected drawdown from current levels is only about 10%. Be patient and you should be able to deploy cash at more attractive levels.

Remember the Momentum Massacre? Too many investors were in a crowded short in the stock market. The cautiousness was manifesting itself in the price momentum factor, which was showing up in low volatility, low beta, defensive and value stocks. The crowded short and long momentum trade began to unwind in late August, and accelerated when the SPX staged an upside breakout from its trading range at 2960 in early September.The reversal was dramatic enough that JPM quant Marko Kolanovic called it a “once in a decade trade” (per CNBC). He made the case that both hedge fund and institutional positioning was too cautious, and a short-covering rally would spark a stampede by the slow moving but big money institutional behemoths to buy beta. Moreover, the reversal could also be a signal for a long-awaited turn from growth to value investing.Since then, returns to the price momentum factor has stabilized and begun to turn up again. Our analysis of the returns to differing factors and sectors is revealing of likely future market direction.We find that the combination of a lack of either growth or cyclical leadership and the defensive sectors the only men left standing leads me to conclude that the path of least resistance for stock prices is down.However, we believe downside risk is limited. We stand by our analysis outlined a report published in early August (see Powell’s Dilemma (Why It Matters)) where we had projected S&amp;P 500 downside risk of 2591–2891, with the mid-range at 2738. The subsequent market weakness pushed the index into the upper end of that range. Current conditions suggests that the valuation is incomplete.In conclusion, downside risk is well within the normal parameters of equity risk. The maximum projected drawdown from current levels is only about 10%. Be patient and you should be able to deploy cash at more attractive levels.

Whatever Happened to the Momentum Massacre?