~204 Managers overseeing ~$614B AUM responded to this month’s BofA survey.
OUTLOOK:
-A record net 25% of investors surveyed by the BofA this month are taking higher-than-normal risks.
-84% of fund managers expecting global corporate profits to improve over the next 12 months.
-For the first time in a year, investors say companies should focus on CAPEX spending over improving their balance sheets (first time since Jan 2020).
-27% see this as an early-stage bull market.
-53% see this as late-stage bull market.
-91% expect stronger economy in 2021 (highest ever).
-V-shaped recovery is finally consensus view.
– CPI (inflation), EPS (earnings) & yield curve expectations all close to record highs.
SENTIMENT:
-Optimism on cyclical risk assets rose to the highest since 2011.
-Just 13% say that U.S. stocks are in a bubble.
-FMS sentiment on global growth at all-time high.
POSITIONING:
-Allocation to stocks and commodities at its highest since Feb 2011.
-Cash levels dropped to the lowest since March 2013 (3.8%). This was just before the Bernanke Taper Tantrum.
-Bond allocations dropped 3 percentage points to a 62% underweight (lowest since March 2018).
-Exposure to commodities and equities is at decade-highs.
-Allocation to U.S. stocks increased 5 percentage points to net 9% overweight.
-Exposure to euro-area stocks dropped 9 points to net 20% overweight.
-Allocation to EM equities dropped 5 points to net 57% overweight, remaining the most-preferred region.
-Exposure to U.K. equities increased 5 points to 10% underweight, remaining the top regional underweight.
MOST CROWDED TRADES:
1. Long Tech Stocks. (35%)
2. Long Bitcoin. (27%)
3. Short U.S. dollar. (13%)
4. Long ESG.
BIGGEST TAIL RISKS:
1. Vaccine Rollout. (28%)
2. Bond “tantrum.” (25%)
3. Inflation (24%)
BANK OF AMERICA COMMENTARY:
“After a record flood of money into equity funds, BofA strategists have warned that such exuberance may precede a correction.”
“The only reason to be bearish is … there is no reason to be bearish,” Bank of America chief investment strategist Michael Hartnett.
“BofA Bull & Bear Indicator 7.7.”
“Cyclicals: high exposure to commodities, EM, industrials, banks relative to past 10 years, but Jan wobble caused investors to top-up safety of growth exposure via tech health care, US stocks.”
CONTRARIAN TRADES (Anti-Goldilocks) according to BofA commentary:
-Contrarian trades bubble move and/or big inflation in 2021 best played via FMS laggards (e.g. Energy & UK stocks).
-Conversely longs in EM, commodities, industrials most vulnerable to peak profits narrative.
-Either way consumer staples a smart contrarian accumulator in H1.
