I’ve got a question for you on Sunday. Here it is: are you someone who thinks the best answer is usually the simplest one?
And I’ve got a follow-up: are you someone who likes tautological reasoning?
Well, if you answered “yes” to both of those questions, then you will love BofAML’s answer to the question implicit in their weekly note on buy-side positioning. Here is that implicit question:
How long will financial assets continue to march higher?
And here is their explicit answer:
Institutions net bought $129bn equity and treasury futures since the U.S. election, with $61bn in US equities, $12.6bn in EM and EAFE, and $55bn in US treasuries (Chart 1). Financial assets will continue march higher absent a reversal of inflows.
Finally, here’s a fun chart:
So ultimately, if you want to know when this whole thing is likely to fall apart, just call up your favorite BofAML institutional clients and ask them when they plan to stop buying.