Source: Felix Tsao
This is classic Wall Street. According to the CFTC's data on futures and options positioning, the Euro is officially the most consensus net LONG position in all of macro.
This may come as a surprise but back six months ago, Wall Street was actually short the euro-area currency. As worries of a French election day victory for the far-right's Marine Le Pen have been lifted, the Euro is up +5.8% (versus the U.S. dollar) in the past six months.
In other words, Wall Street is now long after the move. And since we see the Eurozone economic picture deteriorating towards the back half of 2017, once again Wall Street is building a position that's poised to fade.
This is typical...
Another Wall Street Mistake: The British Pound
Wall Street has been on the wrong side of the British Pound for the past three months too. On fears of ongoing Brexit negotiations, consensus had built up a significant net short position in the Pound by March.
As you can see in the Chart of the Day below, the net short position in the Pound has been cut in half since then. Why? In three months, the pound is up +4.6% (versus the U.S. dollar) as the U.K economic outlook has strengthened. Once again, Wall Street missed the move and is now capitulating.
This is the key takeaway from Hedgeye CEO Keith McCullough in today's Early Look:
"The less quantitatively objective investors are about their process, the more predictable I think they are in response to politically qualitative “catalysts.” If all you’ve done is buy stocks on both Brexit, Le Pen, and Trump fears, you’ve crushed it."
Don't let the media's fear-mongering whip you around. Understand the economic fundamentals and invest accordingly.
