The Kindling of High Expectations

Bob Elliott · Nonconsensus · March 03, 2026 at 11:06  | Read on Substack ↗
TLDR
The article argues that financial markets are vulnerable to shocks when expectations are high, volatility is low, and risk premiums are depressed. It highlights that consensus positioning was extremely bullish before the recent geopolitical event, based on BofA Fund Manager survey data, warning that a downturn in the conflict could lead to significant market losses. • Market risks are amplified when shocks occur during periods of high expectations, low volatility, and depressed risk premiums. • Consensus positioning before the war shock was highly bullish, with investors at peak risk-taking levels and expecting a growth boom. • The BofA Fund Manager survey shows positive sentiment across asset classes, with managers all-in on the rotation trade. • The author cautions that if the geopolitical situation worsens, investors may face a rude awakening due to their optimistic positioning.
Full Analysis

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Length 244 chars
Category finance
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