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©Reuters. BofA’s monthly fund manager survey says investors are now ‘very optimistic’
Investors are adjusting their global equity positions in favor of U.S. stocks and reducing their overall overweight stance, according to Bank of America’s Monthly Fund Manager Survey (FMS).
Analysts at the bank said survey respondents were “very optimistic about rate cuts and a ‘soft’ macro landing.”
However, cash levels rose from 4.5% to 4.8% in January as bond market optimism eases and bonds lead the ‘herd’. The BofA Bullish Index rose to 5.5, the highest since November 2021. ”
Overall, this positioning is not contrarian, with analysts calling it a “new catalyst (e.g. global growth)”. [are] It is necessary for the rise. ”
Investors are particularly bullish on the prospect of rate cuts, with the most crowded trades identified as the ‘Long Magnificent Seven’ and ‘Long Duration Tech.’
The changes include a rotation from bonds to cash, a shift from banks to real estate investment trusts (REITs), and a preference for small-cap stocks over large-cap stocks for the first time since June 2021.
Investors are the least pessimistic about global economic growth since February 2023, but there are concerns that China’s growth will slow for the first time since May 2022.
Key contrarian trades include longs in China, Europe, banks, energy, and low-end stocks. These contrarian longs are considered catch-up plays with room for positive growth.
Conversely, contrarian shorts involve positions in bonds, the US, and the so-called “Magnificent Seven.”
These positions are considered vulnerable to both “hard” and “no-landing” outcomes, suggesting potential challenges or downturns in these areas.
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