Top 10 FMS takeaways
1. Investors long cash: FMS cash @ 5.6% = highest since Nov’01 = unambiguous “buy” signal
2. Investors want capital preservation: Feb rotation to cash, utilities, bonds & telcos; out of banks & stocks
3. Global growth & profit expectations both negative for 1st time since Jul’12; weakest China growth expectations since Dec’08
4. Fed 2016 rate hike expectations: no hike 23%; one hike 33%; two hikes 34%
5. Baby bond bulls: 20% think 10y yields lower next 12 months…up from 4% last July
6. Investors remain long stocks: equity OW fell from net 21% to 5%
7. Paralysis not panic: limited investor capitulation in US$/EU/JP/Tech long positions
8. Big stubborn short positions in Energy, EM, Materials, Commod, Industrials continue
9. Most "crowded trades": long US$ 30%, short oil 25%, short EM 16%, long FANG 12%
10. Capitulation in momentum as outperforming style factor; preference for quality, large cap, yield
Top 3 FMS implications
1. FMS says SPX 1800 "floor” holds/tactical counter-trend rally in risk e.g. SPX back to 1950 “ceiling”; but FMS does not say great cyclical “entry point” back into risk assets (in 2002, 2009, 2011 investors went UW stocks first)
2. FMS says investors have "reset" expectations for macro & markets lower and see default/recession as risk rather than reality
3. FMS says another bout of risk-off more -ve for US$/EU/JP/Tech thanEnergy/EM/Materials/Commodities/Industrials ...nb US$ "most overvalued" since Nov’06...right now investors are much more worried about what they own rather
than what they don't own