Customize Consent Preferences

We use cookies to help you navigate efficiently and perform certain functions. You will find detailed information about all cookies under each consent category below.

The cookies that are categorized as "Necessary" are stored on your browser as they are essential for enabling the basic functionalities of the site. ... 

Always Active

Necessary cookies are required to enable the basic features of this site, such as providing secure log-in or adjusting your consent preferences. These cookies do not store any personally identifiable data.

No cookies to display.

Functional cookies help perform certain functionalities like sharing the content of the website on social media platforms, collecting feedback, and other third-party features.

No cookies to display.

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics such as the number of visitors, bounce rate, traffic source, etc.

No cookies to display.

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

No cookies to display.

Advertisement cookies are used to provide visitors with customized advertisements based on the pages you visited previously and to analyze the effectiveness of the ad campaigns.

No cookies to display.

Loading...
Most Recent Stories

MERRILL LYNCH: FUND MANAGERS MOST BULLISH SINCE APRIL HIGHS

More signs of very high bullishness.  This morning’s Merrill Lynch Fund Managers Survey shows optimism surging to April highs.  Merrill Lynch warns that this could be a red flag.  The survey of 200 international fund managers with $630B in assets shows that institutions have positioned themselves bullishly:

The November FMS shows market sentiment at its most bullish since April 2010. Put simply QE2 has raised both global growth & inflation expectations, reduced cash balances to dangerously low levels and caused capitulation into risk & inflation assets. The bullish consensus makes a normal year-end rally very vulnerable to a deflationary rally in the US$. Progress in the EU sovereign funding concerns and/or strong economic data that boosts bank stocks are now needed to prolong the Autumn risk rally.

Loose policy…surging growth and inflation expectations. The net percentage forecasting stronger global growth jumped from 15% to 35%, while inflation expectations surged from 27% to 48%. The perception that monetary policy is “too easy” rose to its highest level (45%) since July 2004. There was an intriguing decline in Chinese growth expectations while the biggest consensus “tail risk” is a European sovereign debt default.

Risk on: feel the quantity, not the quality. Asset allocators have drained cash reserves (a rare U/W reading of 5%) with average cash holdings falling to just 3.5%; this triggers a contrarian tactical sell signal for equities. Our risk appetite index rose to 45 (the highest since April) and with less than 1 in 5 investors believing a Fed rate hike is likely before Q4 next year, investors raised equities up to net 41% O/W from 27% in Oct and cut bonds to a net 36% U/W (from -24%).

Maximum Bullish on EM & Materials. The proportion of allocators O/W EM increased to a net 56%, close to an all time high. Despite sovereign debt concerns, rotated into Eurozone equities, and the 15% O/W is the largest since 2004. Japan remains the most unloved equity region. In sectors, Tech and Energy remain the favoured global sectors but investors rotated aggressively into Materials (9% to 21%) and out of consumer, pharma and industrials. Banks remain the largest U/W among global investors.

For the contrarians. Despite tail risk concerns in Europe, a clear risk-on message emerges from the survey; but with cash levels falling to low levels there are contrarian signals embedded in that message. At the very least we could see a balancing out of defensive vs. cyclical buying but the risk of a market correction now looks high. For contrarians the sells are commodities, EM equities, global tech and materials and the buys are cash, Japanese equities, global banks and utilities.

Source: Merrill Lynch

Comments are closed.