* The Christmas Consensus
Investors are long Deflation, Cash & the US dollar, and short Inflation, Risk and Commodities.
* Deflation, Commodity Capitulation & the Crowded US$
Deflation the big 2015 risk according to 69% of FMS and expectations for a steeper yield curve now lowest since Jun'11. December FMS shows record low exposure to Energy & Materials, 36% say oil price "undervalued" (highest since Apr'09) and US$ is the most "crowded trade" (acc to 60%).
* Cash Surges, but ECB tempts Risk-On
Cash levels surge to 5.0%, well above 4.5% threshold for risk "buy signal" (FMS shows highest % OW cash since Jun'12). Risk-off across-the-board bar Eurozone stocks as big rise in ECB QE hopes (63% say QE in Q1) sharply boosts allocation
* Crude Collapse leads to Big Rotation...
...out of commodities, energy & materials into US$, cash, tech & discretionary stocks. Relative to FMS history, investors are most OW discretionary, Japan, real estate, banks, tech (in that order). Deflation mindset revealed by 4-year low in
investors saying “Value” outperforms “Growth”.
* Best December Contrarian Trades are...
...both sector trades: long energy, short telecoms; long industrials, short consumer discretionary. Nov contrarian trades: long Eurozone, short Japan worked well; but long energy, short utilities did not work.