What the desk is arguing
The current analysis suggests that the momentum trade may be reaching its limit as the market grapples with widening performance gaps among stocks. With momentum dispersion at the highest level since 1990, a rotation towards undervalued sectors is anticipated. Per the full note, the strong outperformance of the MSCI USA Momentum Index indicates that this trend is not as sustainable as it once appeared.
Furthermore, J.P. Morgan forecasts that investor interest might shift from high-flying momentum stocks into other areas of the market that have been lagging, creating opportunities in neglected sectors. This shift is evident as overall investor interest is declining even amidst significant gains.
Where it sits in our coverage
Our internal consensus for the EUR/USD is set at a target of 1.075 with a range spanning from 1.04 to 1.12, reflecting differing outlooks among banks on currency pair movements. Specifically:
- jpmorgan: target of 1.10 for Mar-26
- bofa: target of 1.04 for Mar-26
This position is central within the current consensus, with jpmorgan slightly above the average target while bofa sits below it, indicating a divergence in sentiment regarding the most favorable directional trade in this environment.
How other firms see it
Most firms are cautious, echoing the desk's views on the diminishing strength of the momentum trade. Aligned firms, such as jpmorgan, support the idea that a significant market shift might be underway. Conversely, firms like bofa express skepticism, predicting more downside potential in equity markets.
In the current market climate, equity movements will likely impact currency pairs such as the USD/EUR connection, as shifts in risk sentiment might encourage volatility across major currencies like USD/JPY.