After the strong stock market year of 2024, investors are faced with the question of a possible repositioning in the new year. While Banque Syz experts remain optimistic for 2025, they have identified ten potentially surprising market developments. One of those potential surprises involves a mega-fund.
• Banque Syz warns of fund collapse
• Possible chain reactions
• Real risks as a background
Investments in the risk sector continue to have opportunities in the new stock market year, believe the market experts at Banque Syz. The financial group’s analysts are counting on a continued robust global economy and are also assuming continued strong double-digit growth rates for S&P 500 companies in terms of earnings development. In addition, they also see low real interest rates in developed countries as positive for the market outlook. Nevertheless, investors should not expect unbridled upward trends for their investments in the new year, as there are definitely challenges to be overcome, which means that “the path for global equities may not be entirely smooth,” said the experts in their outlook “10 surprises 2025”.
Will a mega fund collapse?
Banque Syz summarizes one of these potentially challenging surprises for the new year under the heading “A large fund explodes”. They see the risk that a large fund may have positioned itself incorrectly and could be involved in the wrong trades. According to the experts, the background to this fear is “the combination of a concentration risk of the Magnificent 7 shares and the increase in 0DTE options [also Zero Days to Expiration (0DTE), Optionen, die am Tag des Handels verfallen, Anm. d. Red.] “unusually low volatility and strange movements in the foreign exchange and commodity markets”.
The collapse would be triggered by an investment in the fund that moves in the wrong direction, which would then lead to a chain reaction in other trades within the portfolio, writes Banque Syz. As a result, a volatility event will then be triggered. Such an event would not be entirely without precedent: experts see the possibility that there could be a flash crash like the one in 2015, or a collapse like that of the hedge fund Long-Term Capital Management (LTCM) in 1998 had gotten into trouble, at that time only a rescue operation could have prevented further spillover into the US financial system and on a global level. The financial experts at Banque Syz also see a possible negative role model in the “Volmageddon” event from 2018: At that time, a massive increase in interest in 0DTE led to a volatility shock on the markets – assets worth billions were destroyed as a result.
Risks of a very real nature
How realistic the scenario of a large market fund collapsing actually is remains to be seen. In fact, the possible events that could cause such a crash are real market risks. Zero-day options (0DTE) are one of the risk factors on the market that other experts repeatedly warn about. The options are extremely popular among retail investors.
And the fact that the great stock market power of the Magnificent 7 stocks Tesla, Meta Platforms, Amazon, Google parent Alphabet, NVIDIA, Apple and Microsoft entails a concentration risk should also hardly surprise market observers. In particular, the hype surrounding the AI giant NVIDIA, which is probably not over yet, could also prompt fund managers to further expand their investments in this area and thus further increase the concentration risk.
How seriously Banque Syz takes its own market surprises remains speculation. After all, the financial institution also believes that a wedding between Tesla boss Elon Musk and Italy’s Prime Minister Giorgia Meloni is possible in 2025.
Editorial team finanzen.net
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