Six warning indicators within the Financial institution of America fund supervisor survey

Financial institution of America is out with its newest survey for fund managers and it reveals just a few worrisome spots. Listed below are some highlights:

1) It was the most-bullish fund supervisor survey in 2 years in line with BofA

The aim of the survey is to light up fashionable but additionally overcrowded trades. This one speaks for itself and it comes after a sensational 3-month rally for danger property. Money ranges are all the way down to 4.2% from 4.8% and everyone seems to be in tech.

2) For the primary time since April 2022, buyers aren’t predicting a recession

That is a type of issues that appears like a purple flag however I do not actually suppose it’s. I might be rather more anxious if it confirmed predictions of a scorching economic system. To me, that is extra of a return to impartial. Requested concerning the path of the economic system this 12 months, two thirds say ‘soft landing,’ 1/5 say ‘no landing,’ 1/10 say ‘hard landing’. Given immediately’s CPI, the ‘no touchdown’ one is wanting like the principle downside, and the inflation that will include it.

3) Extra on the inflation downside

Simply 4% anticipate greater brief charges, simply 7% anticipate greater inflation and 85% say yield curve will steepen. That is a real purple flag and a type of situations the place the world does the precise reverse of what everybody is considering and everyone seems to be positioned unsuitable. It is a massive warning for me to watch out about greater inflation as a result of if the tide turns, there can be enormous place shifts.

4) Lengthy Magnificent 7′ most crowded commerce since “long US$” in Oct’22

As you may see from the greenback, when a commerce will get too crowded, the sensible factor to do is to fade it, or a minimum of get to the sidelines.

5) Brief China shares’ second-most crowded commerce and 1/4 say structural underweight of China is true technique

Being reverse a crowded brief commerce is normally an even-better commerce than fading a crowded lengthy. However you want some form of catalyst on China and which means some assist from Beijing. In any other case, buyers will proceed to deal with the chance of getting “Russia’d” on a Taiwan invasion.

6) How BofA sees it

Their contrarian trades for a for laborious touchdown are lengthy money and defensives whereas being brief US/Japan and tech shares;. For a ‘no landing’ situation, the commerce could be lengthy commodities, power, the US greenback and
brief bonds.