The High-Beta Frenzy: A Warning Sign for Markets

As U.S. stocks hover near record highs, enthusiasm for high-volatility names is boiling over — and that’s making some analysts nervous.

CNBC’s Jim Cramer just unveiled his latest acronym: PARC — Palantir, Applovin, Robinhood, and Coinbase — a group of high-beta, momentum-driven stocks. Critics were quick to point out that “PARC” spelled backward is a warning in itself.

More importantly, this surge into high-beta stocks is setting off alarms on Wall Street.

JPMorgan strategist Dubravko Lakos-Bujas says investor positioning has hit extreme levels. In fact, he notes this is the third major “crowding” event this year:

• January: Investors piled into mega-cap AI winners.
• April: Fears over AI overhype and tariffs pushed flows into safe, low-volatility stocks.
• Now: The pendulum has swung aggressively into high-beta territory.

According to JPMorgan, the current high-beta crowding is in the 100th percentile — meaning it’s as extreme as it gets — and the speed of the move is unprecedented, rising from the 25th to 100th percentile in just three months, the fastest in 30 years. Short interest has also collapsed, indicating that investors aren’t hedging for downside risk.

“This level of positioning reflects complacency and presents a risk not just to these speculative stocks but to the broader market,” Lakos-Bujas warned.

Many of the most crowded names are retail favorites, including:

• Palantir (PLTR)
• Coinbase (COIN)
• Nvidia (NVDA)
• Super Micro Computer (SMCI)
• Tesla (TSLA)

So, what now?

JPMorgan suggests rotating into low-volatility stocks, which underperformed after peaking in April but now offer compelling risk/reward. With upcoming tariff deadlines (Aug. 1), seasonal market weakness, and stretched investor sentiment, defensive names could shine.

Their top picks include:

• Coca-Cola (KO)
• Allegion (ALLE)
• Intercontinental Exchange (ICE)
• CME Group (CME)
• CBOE Global Markets (CBOE)

In a market chasing risky bets, the safer plays may soon have their moment again.