Fund managers see emerging markets as most-crowded trade
The most-crowded trade is in emerging markets, according to the fund manager survey from Bank of America Merrill Lynch. It's the first time in survey history that EM tops the list and marks a complete reversal from short-EM as the third most-crowded trade last month.
The rush into emerging markets is all about Chinese stimulus, the central bank reversal and hopes for a US- China trade deal. Since late in December all those themes have turned positive and money has rushed in.
The second-most crowded trade is long the US dollar. It has been #1 since December. The third-most crowded trade is long FAANG+BAT (Facebook, Amazon, Apple, Netflix, Google + Baidu, Alibaba, Tencent) which was #1 from Feb -Nov 2018.
Overall, the survey didn't point to long-EM as particularly stretched and 'crowded' trades tend to last months in the survey. There is also the dichotomy of long EM and long USD being the two most-crowded trades when in reality they tend to move in opposite directions. That suggests the market is polarized on the outcome of the trade war.
Along those lines, many are also sitting out with the allocation to cash at the highest since Jan 2009.