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2021 started out as a relatively uneventful month of positive
momentum in high risk shares, carried over from the end of last
year, on optimistic vaccination and economic outlook. However,
pressure built up in the final week of January in a battle between
day traders and hedge funds, resulting in frenzied trading in
GameStop and other heavily shorted stocks, with major indexes
erasing their initial gains for the month. Yet, retail investors'
uprise could not derail the bull market and stocks continued to
make new highs in the early days of February. As the bull market
rages on, we take a few snapshots of factor exposures to highlight
current market attributes.
In mid-January 2021, a handful of the most shorted stocks saw a
parabolic increase in performance relative to the market, though
valuations of a broader set of highly shorted stocks remained
comparatively in check
As the market rebounded from the pandemic lows, investors bid
up the valuations of high risk names in addition to those with
negative earnings
A notable number of stocks are trading at elevated
price-to-earnings and price-to-sales multiples, alongside those
trading at 52-week highs
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