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BofA Merrill Lynch November Fund Manager Survey finds investors’ global risk appetite noticeably increases

Redacción - Martes, 14 de Noviembre

Highlights include: ·  Average cash balance falls to 4.4% from 4.7% last month, the lowest level since October 2013 and below the 10-year average of 4.5% ·  A record high (net 16%) of investors say they are taking above-normal levels of risk in their investment

·         The net share of investors taking out protection against a correction in markets decreased this month to -37%

·         A record high net 48% of investors surveyed indicate equities are overvalued

·         Goldilocks is now the consensus view for the global economy, with a record high 56% of investors expecting above-trend growth and below-trend inflation

·         Allocation to global equities rises to net 49% overweight, the highest level since April 2015

·         Pessimism toward UK equities continues to rise, as net 37% underweight marks the return to lows last seen during the financial crisis

·         Allocation to Japanese equities rises to net 23% overweight, the highest level in two years

·         Long Nasdaq is considered the most crowded trade (34%) for the sixth time this year, followed by Short volatility (26%) and Long US/EU/EM high yield corporate bonds (18%)

·         Investors are split on the likely impact of Fed balance sheet reduction and ECB tapering on equities, with 42% expecting lower stock prices and 35% expecting stocks to go higher

·         Investors eye central banks, with 27% of those surveyed indicating the biggest tail risk to the markets is a policy mistake from the Fed/ECB; the top three are rounded out by a crash in global bond markets (22%) and a flash crash caused by “market structure” (13%)

 

“Icarus is flying ever closer to the sun,” said Michael Hartnett, chief investment strategist, “and investors’ risk-taking has hit an all-time high. A record high percentage of investors say equities are overvalued yet cash levels are simultaneously falling, an indicator of irrational exuberance.”

Ronan Carr, European equity strategist, added that, “UK sentiment is severely depressed and remains the least popular country market for European investors.”

“Global fund managers see the profit outlook in Japan as favourable amid a strong earnings season,” said Shusuke Yamada, chief Japan FX/Equity strategist. “Investors continue to see Japan equities as undervalued relative to other markets and say they want to overweight Japan for the next 12 months.”

 Global Fund Manager Survey: It’s frothy FAANG


•   Big market conviction in Goldilocks leading to capitulation into risk assets
•   FMS cash level at 4-year low; FMS "risk-taking" at all-time high
•   Our conviction in winter post-tax reform risk asset correction hardens

European Fund Manager Survey: Bullish risk appetite suggests the pause is warranted


•   Risk appetite ramped up: cash at 4yr lows, above normal risk-taking at record highs. Hence, pause in markets may continue.
•   UK sentiment near historical lows but Japan surged in popularity. Long Nasdaq, short Vol & long credit the "crowded trades".
•   Oil most popular sector in Europe (positioning at 5yr high). Industrials, Tech next. Food & Bev. / Utilities least popular.

Japan Strategy Fund Manager Survey: Japan allocation rises further as Icarus-san takes off


•   Japan allocation rose to 32% OW, back to the 2014-15 level. More investors want to overweight in the next 12 months.
•   Higher allocation, rising sense of overvaluation among Japan specialists, and lower cash balance may justify a correction.
•   There could be a margin of allocation expansion on relative valuation, profit outlook, FX valuation and reduced N Korea risk.




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