BofA September Global Fund Manager survey: Short-term “pain trade” is up again for risk assets
{X,} FMS sentiment is super-bearish, BofA says, with cash levels rising to 6.1% - the only ever higher reading came after 9/11.
{X,} BofA says that max bear sentiment and benign data has resulted in SPX retests and fails of 4,300; BofA says it is remaining fundamentally and patiently bearish.
{X,} On the macro front, FMS reveals global growth expectations are near all-time lows, with a net 72% expecting a weaker economy next year, a net 79% expect lower inflation in the next 12 months.
{X,} On policy, investors think the peak Fed Funds Rate will be 4.0-4.25% in Q2 2023; mid-term election expectations shift, with a GOP sweep seen down from 44% to 28%, GOP House/DEM Senate up 8% to 22%.
{X,} On risk: cash levels jump from 5.7% to 6.1% as record net 60% investors taking lower-than-normal risk
{X,} On tail risks: Top 3 tail risks are inflation, central bank hawks, geopolitics.
{X,} On asset allocations: The most crowded trade is long USD, contrarians note most extended FMS position since 'long US tech' in November 2020; cash allocation at record overweight (62%), stocks at record underweight
{X,} On sectors and styles: FMS is the most underweight on European equities ever, and most overweight consumer staples since Dec 2008. The September rotation has been from tech to banks.
{X,} On contrarian trades: FMS says it is unambiguously 'short USD', 'long equities-short cash', 'long EU cyclicals-short US defensives', and 'long consumer discretionary-short energy'.