BAML survey reveals "cracks in the bull case"
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A potential slowdown in global growth exacerbated by trade wars are worrying fund managers right now.
A monthly barometer of sentiment by Bank of America Merrill Lynch (BAML) also reveals that global investors were likely to be highly exposed to this week’s plunge in tech stocks.
Investors poured into tech stocks during the week of March 9-15 with the survey showing that it was the most crowded trade with a net 38% overweight. Second is short dollar positions at 17%.
FAANG stocks have since dropped amid the data scandal surrounding Facebook.
The survey shows that investors are concerned about global trade, seeing it as the biggest risk to growth for the first time since January 2017.
Since then, the month President Trump took office, fears of trade wars have escalated with Canada and Mexico embroiled in NAFTA negotiations, the US pulling out of the Trans-Pacific Partnership, and uncertainty over Brexit.
Bank of America Merrill Lynch’s chief investment strategist Michael Hartnett says confidence in the current bull market is slipping.
"Cracks in the bull case are starting to emerge, with fund managers citing concerns over trade, stagflation and leverage. Investors have yet to act on these fears, however, as rates and earnings are keeping the bulls bullish," he said.
