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Is The Laggards-To-Leaders Trade Rolling Over?

Submitted by Tyler Durden on 03/12/2012 14:45 -0400

This year has been characterised by a dash-for-trash as the flood of central bank liquidity sent the marginal dollar into every down-beaten, over-shorted, unprofitable, over-leveraged, illquid stock it could get its hands on. As Goldman notes today, however, this laggards-to-leaders strategy is starting to underperform in the last few weeks. Buying the trailing 12M laggards and selling the trailing 12M leaders had returned an impressive 7% YTD but since mid-February (which notably was when credit started to underperform equity markets more directly) performance of this 'pair' has lost almost 3%. It seems the liquidity-floats-all-boats mentality is indeed leaving the market and with a refocus on growth (that this likely implies) we suspect correlation will pick up once again to the downside.

Chart: Goldman Sachs

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Mon, 03/12/2012 - 14:50 | 2248004 SheepDog-One

OMFG looks like a FED spokesman needs to come out with the 'QE3 Sterlized and Exfoliated' rumor again today.

Mon, 03/12/2012 - 14:51 | 2248007 espirit

Stash for trash?

Not in my vocabulary.

Mon, 03/12/2012 - 14:51 | 2248008 The Axe

SHLD has gone from 28 to 82 in that time frame...a stock that will go chapter 13 or 11 one day soon.....crazy market...

Mon, 03/12/2012 - 14:52 | 2248014 gjp

so this means buy stocks that have already added 30% or more this year like AAPL, WFM, SBUX, HD. Long live the US consumer! Who cares how or if they pay for it?

Mon, 03/12/2012 - 14:54 | 2248020 wee-weed up

But... but... the VIX is still at rockbottom!?!?

Mon, 03/12/2012 - 14:58 | 2248029 LawsofPhysics

will go lower.

Mon, 03/12/2012 - 15:38 | 2248163 redpill

Hmm, can someone remember that part in The Black Swan of Cairo where Taleb talks about what happens when you artificially suppress volatility for a substantial period of time? I know it was an important part but golly I just can't remember. Anyone? Bernank? Timmy? Obombya? Bueller?

Mon, 03/12/2012 - 15:06 | 2248048 Moneyswirth