IBy Michael Hartnett, Jared Woodard and Tommy Ricketts, BofAML D Analytics Investment Strategy Global
Analysts at Bank of America Merrill Lynch have just dropped their top eight takeaways from their global fund manager survey.
bearish, GDP & EPS optimism has crashed, 10-
year high in leverage fear…but investors discounting “secular stagnation” not , a steeper yield curve (Exhibit 1), and are adding risk via tech stocks & EM assets.
Global GDP & EPS growth expectations plummet toward 2001 & 2009 lows…but just 14% of investors see “recession” in 2019.
Investor demand for companies to improve balance sheets highest since Sept’09; investors demand higher the lowest since Oct’09.
Long US$ is #1 “crowded trade”, US$ seen as most “overvalued” since 2002; #1 tail risk is still “trade war” but fears are way down from Jul’18 peak.
The good news was inflation expectations plunged allowing investors to discount a new dovish Fed & a bull steepening of curve; no surprise that Jan FMS shows de-risking is over.
FMS cash levels up slightly to 4.9%, hedge fund gross exposure cut to 8-year low; Jan FMS shows investors adding to tech & EM while cutting exposure to industrials, Japan & European stocks (to 7-year low).
Still “defensive” but of the predicted bear moves from the BofAML trading rules (i.e. –70bps in Treasury yields, +230bps move in credit spreads) is now behind us.
“C leverage” via risk assets, long EM FX, long US industrials & small cap versus short healthcare, and long European stocks.