Heavens to Betsy! I almost forgot to mention the May vintage of BofA’s closely-watched Global Fund Manager survey, released on Tuesday.
I’m just joking. I didn’t almost forget. I just didn’t care. So, I saved it until I had everything else done.
I habitually employ the “closely-watched” description of Michael Hartnett’s monthly poll. Spoiler alert: I have no idea how “closely” anyone watches it. I’m just making it up when I say that. The survey’s widely read as these things go. That’s all I know. And the less I claim to know, the wiser I am. Ask Socrates.
Anyway, for those of you whose horizons are so limited that this sort of thing piques your interest, the May installment was “the most bullish since November of 2021,” Hartnett said. So, the most bullish since the height of the so-called “everything bubble.”
Most notably, perhaps, cash levels fell to just 4%, as illustrated below.
That’s a contrarian “sell” signal. The peak was north of 6% at the cycle lows for equities in October of 2022. Note that cash levels were sub-4% at one juncture in 2021.
On the policy front, more than 80% of panelists say rate cuts are coming in the second half, consistent with market pricing.
If you have trouble with simple bar charts, I’ll spell it out: Fund managers are split on whether the first cut will come in July/September or in November/December. A very small minority (14%) thinks the first cut will get pushed into 2025. And 2% of fund managers think the Fed won’t cut at any point over the next two years. (If that 2% includes your manager, I’d gently note that he or she is wrong.)
As far as the economy, a recession’s unlikely. Or so say people. “Professional” people. Nearly two thirds of FMS investors don’t see a recession in the next 12 months.
Those who do expect a downturn see it in H1 2025. There was supposed to be a recession in H1 of 2024 and also in H1 of 2023. If we just keep rolling it forward, maybe we’ll eventually be “right.”
Perceived “no landing” probabilities receded a bit this month, while “hard landing” odds increased. Still, “soft landing” dominated with 56% share of the vote.
As for positioning, pretty much all you need to know is that stock allocations were the highest since January of 2022 this month. So, the highest since rates were parked at the lower bound.
The MoM stock allocation increase was 7ppt. Survey respondents are now 41% Overweight.
“78% expect the Fed to cut two, three or more times over the next 12 months,” Hartnett wrote, editorializing around the results. “Little wonder ‘higher inflation’ [was] the #1 tail risk for investors.”
There was more. A lot more. I’ll probably find occasion to highlight a few additional notables at some point. But the bottom line, from Hartnett, was this: “Sentiment’s not at ‘close-eyes-and-sell’ levels but risk assets are vulnerable to more evidence of stagflation.”
