What if consensus being concerned that “it’s all priced in” is all priced in? Oh boy, from Friday’s all-time SPY high wouldn’t that be a shocker. It certainly was for those who didn’t understand the risks associated with Quad 4 in Q4 of 2018.
I get it. The performance pressure out there is surreal. Back when I started as an analyst at a hedge fund in 2000, we used to have a marketing slide showing our performance’s correlation to US Equity Beta (i.e. to what the market is doing) at 0.3.
Today, depending on what swath of the over-supplied mutual and hedge fund universe you’re looking at, that correlation is closer to 0.8-0.9. Reality is that consensus PMs chase high and freak-out (sell) lower. They don’t do The Quads.