Returns in Group-of-10, emerging market and global carry trade baskets tracked by the bank have fallen about 10% since May, quantitative strategists Antonin Delair, Meera Chandan and Kunj Padh wrote in a note to clients. The moves have wiped out the year-to-date returns and significantly cut into profits accumulated since the end of 2022. 

“The spot component of the global carry basket would suggest that 75% of carry trades have been removed,” the JPMorgan team wrote, reiterating that the “clock is ticking for the G10 carry.”

The carry strategy — which involves borrowing at low rates to fund purchases in higher-yielding assets elsewhere —  has been wobbling for months. Carry trades were pummeled over the past week as global market volatility jumped amid fears of rapid Federal Reserve rate cuts and after the Bank of Japan’s larger than expected rate hike. 

The recent selloff has been double the usual pace in a carry drawdown, with the strategists suggesting there may be small opportunity for a rebound in August as “the central bank calendar is light for this period and volatility already started to cool off.”

However, the global carry trade strategy is “not offering an attractive risk-reward,” they emphasized. “The yield on the basket has plummeted since the highs of 2023 and is not a sufficient compensation for holding EM high betas through US elections and the risk of further repricing of low yielders if US yields fall.”