Honing in is what matters amid market volatility

AUGUST kicked off with a perfect storm that sparked the great unwind of some of the most crowded, popular trades.

After a strong first-half performance, this recent bout of market volatility is a timely wake-up call for investors, a reminder that the best-laid plans can be derailed by short-term factors.

Crowded trades are positions where investors may have factored in some level of consensus and elevated expectations of certain outcomes. Some examples: That earnings growth justifies higher valuations for generative artificial intelligence (gen AI)-related stocks; or that higher inflation and a stronger US economy correlate with higher bond yields; or that a weak Japanese yen correlates with borrowing the currency to fund trades, in addition to buoying the prospects of Japanese exporters.