Some of the notable points from the latest BoA / ML survey of fund managers
Summary via the bank, they seem to be highlighting investor complacency:
We stay bearish
- investor positioning does not yet signal The Big Low in asset markets
- BofAML Bull & Bear Indicator 3.1, i.e. no "extreme bear" contrarian buy signal
investors forecast S&P500 peak of 3056 (+10%), waiting for 3.7% on 10-year Treasury yield before rotating from stocks into bonds.
cash level drops sharply in Nov to 4.7% from 5.1%
- i.e. investors bought Oct correction
- FMS cash drop funded increased exposure to US & EM stocks, REITs, and healthcare (now the #1 EMS sector overweight)
but allocation to global tech sector collapsed to lowest level since Feb'09 (and long FAANG+BAT" still #1 FMS "crowded trade")
- ominously Nov FMS showed no investor rotation from tech to "value", i.e. banks, small cap, industrials, EAFE
expectations for global GDP lowest since Nov'08, EPS lowest since Jun'12, China GDP lowest since Feb'l 6; yet only 11% forecast global recession in 2019 (no policy panic likely until recession fear)
investors say excess corporate leverage record high, and investor preference for higher capex vs. healthier balance sheets narrowest since Dec'09 (this metric has good correlation with equities over bonds)
FMS investors say best performing assets in 2019 will be non-US equities (45%) & S&P 500 (17%); worst will be corporate bonds (25%) & government bonds (24%). • FMS contrarians note US stocks, global healthcare most vulnerable to deeper bear; and last domino to drop in '19 likely US dollar (most overvalued since 2006); trading bulls should play year-end rally via China plays (Eurozone, industrials, materials)
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