Major Wall Street banks are telling clients to be ready for a sudden rip higher in the market

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Wall Street firms have a playbook for a potential rapid move higher in stock markets.

highlighted the possibility of another quick move higher. They refer to a so-called "melt up," driven by investors late to the game looking to get in on a positive momentum shift and often a sign of a late-stage bull market. The S&P 500 is up more than 17% this year, but there have been little inflows into stocks, suggesting a whole group of investors that could one day rush back in.

"Investors are wondering whether to hop on for the ride or avoid adding risk in case the end of the rally is near," Bank of America Merrill Lynch analyst Benjamin Bowler said in a note to clients this week. "Recent 'green shoots' in the global economy and a benign positioning picture suggest there may be room for US equities to run further."

"As the rally continues, investors are growing more excited about the possibility of a 'melt-up' – a further sharp move higher in the US market fueled by a dovish Fed, stabilising data and light investor positioning," Morgan Stanley analyst Andrew Sheets said in a note to clients this week. "For investors worried they are under-exposed to a more bullish scenario, we think call options offer the best risk-adjusted way to add beta.

Source: News Formal (newsformal.com)

 

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