The "smart money" is the most bearish on stocks since 2008, with "recession coming," finds BofA surveys
Professionals have turned strongly bearish in their prospects of stock market and economy, according to Bank of America Merrill Lynch's December survey of more than 240 professional investors worldwide.
53% of those surveyed see the global economy deteriorating over the next twelve months, up from 44% in November, the highest proportion of those surveyed since October 2008.
This bearishness has led to fund managers say that the most crowded trade right now is long dollar, after 10 straight months where the most popular smart-money deal was long FAANG + BAT shares, an acronym that accounts for the fast-growing US technology companies Facebook Inc.
FB, + 3.76%
Apple Inc. .
AAPL, + 1.58%
AMZN, + 2.52%
NFLX, + 4.56%
and Google parent Alphabet Inc .
GOOG, + 2.76%
plus the Chinese tech giants Baidu Inc .
BIDU, + 0.01%
Alibaba Holding Group Ltd.
and Tencent Holdings Ltd
TCEHY, ] + 0.81%
It has been common in recent years for money managers to report the dollar as the most crowded trade, for example, a 12-month period from October 2014 to September 2015. But in those cases, it was believed in the Federal Reserve's long-term plans for tighter monetary policy compared to the rest of the world that drove such an interest.
This time, according to Bank of America, the main investment strategy Michael Harnett, the fact that the dollar exchange rate is overflowing with a backdrop of bearishness against stocks and global growth, and the belief that the Federal Reserve is close to the end of its tightening cycle means that investors see a "recession comes," Harnett wrote in an analysis of the survey.
This recent cautious attitude has contributed to burning a stamped from growth stocks to more secure investments, as the December survey showed the largest one-month rotation in bonds, along with major features in defense stocks such as staples and tools.
At the same time, the proportion of cash in mapped investors increased portfolios from 4.7% in November to 4.8% in December, but this level is "not enough to trigger a contracted purchase license for risk permissions", according to Harnett.
Eric Wiegand, senior portfolio manager at US Bank, agrees with the results of the survey, telling MarketWatch that he has reduced risk in his customer portfolios, as he is waiting for more security about global growth, trade policy and the Fed-Cashier's Road Policy. "Institutional investors have torn and taken a more guarded position," he said.
Wiegand claims that the best effort to help improve investor feelings is a healthy round of healthy corporate earnings when the fourth quarter earnings season begins in just less than a month.
But equally strong fourth quarterly figures can be overwhelmed by a worsening global economy, exacerbated by trade tensions between the United States and China, as no concrete progress has been made on an agreement to eliminate the threat of higher tariffs in 2019.
Fund Managers Investigated by Bank of America agree as 37% of them say trade war dynamics are the biggest risk to the economy in the coming months, twice as many as those called either quantitative tightening or a decline in the Chinese economy.
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