JPMorgan strategists say markets have seen three waves of extreme crowding in style factors this year.
April brought a shift to low-volatility stocks amid fears of AI overspend and recession risks from tariffs.
The move from the 25th to 100th percentile happened in just three months, a pace JPMorgan calls "unsustainable." Short interest has collapsed, leaving investors poorly hedged.
“This crowding reflects growing belief in a Goldilocks scenario—resilient growth, Fed cuts, and tariff fatigue,” the team says. But they warn it signals rising complacency and presents a broader market risk.They advise rotating back into low-volatility stocks, which now offer better risk/reward amid looming August 1 tariff deadlines, poor seasonal trends, and stretched positioning.
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