The BofA monthly fundie survey says it all this month:
Bottom line: least bullish survey since Oct’20; FMS cash levels jump to 12-month high as global growth expectations turn negative 1st time since Apr’20 on inflation & China pessimism; allocation to bonds slumps to all-time low, to stocks still very high (Chart 1).
FMS on Macro: bearish…net 6% of investors say global growth to weaken next 12-months, 15% say profit growth to slow (margin outlook worst since May’20); predictions of “boom” drop to 61%, of “stagflation” up to 34%, as gap between“transitory” vs “permanent” inflation continues to narrow (58% vs 38% respectively).
FMS on Policy: less bullish…85% expect higher short-term rates, high since Nov’18; one Fed rate hike penciled in for‘22 (in Nov, was Feb’23); forecasts for steeper yield curve drop to lowest since Jun’19; US fiscal stimulus hopes drop from $1.9tn to $1.7tn.
FMS on AA: risk-on…allocation to commodities jumped to net 28%, to stocks remain high 50%, to cash up to 27% (15-month high), to bonds -80% = all-time low;
FMS cash shoots up to 4.7% from 4.3%;
BofA Bull & Bear Indicator drops to 5.0.
FMS on Sectors & Regions: value-on…big rotation to banks & energy from healthcare & staples; banks now #1 global sector (highest OW since May’18), healthcare #2, energy surges to #3 (highest OW since Mar’12); utilities & staples big UW’s; Europe #1 equity region, OW to US @ 12-month high, but EM exposure slumps to lowest since Sep’18.
FMS on Risks & Crowds: inflation (48%) clear #1 “tail risk”, China (23%) now #2,COVID (3%) down to #5; long tech, long ESG, short China/EM top 3“crowded trades”.
FMS Contrarian Trades: on “rates shock” sell US & tech; on “growth shock” go long bonds, utilities, staples & short banks, energy, commodities; on “return-to-Goldilocks” go longEM, industrials & short US dollar (investors most positive on US$ since Jun’18).
Talk about a stock boom long in the tooth. It always amazes me how little China penetrates the consciousness of Wall Street.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
