Monday, November 28

Bank of America survey ‘screams’ capitulation with rally set for 2023


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The sentiment on stocks and global growth among fund managers surveyed by Bank of America Corp. shows full capitulation, opening the way to an equities rally in 2023.

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The bank’s monthly global fund manager survey “screams macro capitulation, investor capitulation, start of policy capitulation,” strategists led by Michael Hartnett wrote in a note on Tuesday. They expect stocks to bottom in the first half of 2023 after the Federal Reserve finally pivots away from raising interest rates.

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“Market liquidity has deteriorated significantly,” the strategists said, noting that investors have 6.3 per cent of their portfolios in cash, the highest since April 2001, and that a net 49 per cent of participants are underweight equities.

Nearly a record number of those surveyed said they expect a weaker economy in the next 12 months, while 79 per cent forecast inflation will drop in the same period, according to the survey of 326 fund managers with US$971 billion under management, which was conducted from Oct. 7 to Oct. 13.

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Global equities have rallied in recent days amid support from technical levels, changes in UK government policies and a focus on earnings. Hartnett and his team described the rally after a US inflation print last week as a “bear hug.”

Other survey highlights include:

  • In absolute terms, investors are most bullish on cash, health care, energy and staples, and most bearish on equities, UK and Eurozone stocks, as well as bonds
  • The most crowded trades are long US dollar, short Europe equities, long ESG assets, long oil, short emerging markets/China debt and equities as well as short UK debt and equity
  • A record high share of 68 per cent see the dollar as overvalued
  • Investors see European sovereign-debt markets as the most likely source for a systemic credit event
  • Investors see rising odds of a policy pivot in the next 12 months, with 28 per cent of participants seeing lower short-term rates within that timeframe

Bloomberg.com



financialpost.com