"Red, White And Boom" - Latest BofA Fund Survey Sees Near Record Euphoria, Plunge In "Cash On Sidelines"

Tyler Durden's picture

In its latest monthly Fund Managers Survey, Bank of America gives readers two options for a title:

  • Red, White And Bullish, or
  • Red, White and Boom

Both capture the prevailing sentiment, because just months after gloom had set in within the professional investing class, with secular stagnation quietly mentioned as one of the prevailing concerns, optimism has soared to a near record high level. This is how BofA's Michael Hartnett explains it:

Wall St. is bullish: expectations of “above trend” growth at five-year highs...

... global inflation expectations at second highest % since Jun 2004

... global profit expectations at six-year highs, with a  net 56% thinking global profits will improve next 12 months, up from net 29% last month, because of, well, Trump...

... just 6% forecast lower bond yields in 2017, leading to a plunge in allocations to bonds, which just hit a 12 month low (net 58% UW from net 48% UW last month).

 

... long US dollar by far world's most “crowded trade”.

As a result of the violent moves in recent weeks, global bank stock positioning has hit record highs:

 

The optimism euphoria also means that all of the "cash on the sidelines" is no longer on the sidelines (although one wonders what happens to the cash that the sellers of risk assets pocket - does it go into some magical, parallel universe where it is no longer "on the sidelines?").

As Bank of America shows, cash drops to 4.8% (from 5.0% in Nov, 5.8% in Oct); and warns that on three prior occasions cash down 1ppt in two months (in 2001 & 2002) risk rally “paused”; but this time may be different: "FMS does not yet show “peak greed”...cash levels still high relative to bonds (97th percentile), and equities (64th percentile)."

In terms of exposures, not surprisingly In December investors rotated out of “growth” (tech, healthcare) and “bond proxies” (utlities, telcos, staples) into resources, banks and cyclicals.

Expectations: Net 39% expect value to outperform growth (up from net 30% last month); 32% expect high-quality stocks to outperform low-quality stocks (down from net 42% last month). Highest % in 13 months expect high-volatiilty to outperform low-volatility and HY to outperform HG bonds.

 

FInally, while at this point it is silly to even think of such silly things as "risks", this is what the consensus believes is the biggest "tail risk."

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Seasmoke's picture

Red White Blue+Green > Gold. Looks like I lose.

LawsofPhysics's picture

Physical or paper gold?

All my grams remain intact and are still the preferred collateral regardless of the "fiat du jour"...

Seasmoke's picture

Physical of course. The kind you could buy more grams today then you could on November 4th. And Im sure buy more ounces tomorrow than you can today.

LawsofPhysics's picture

Yes, and it will continue right up until there is no supply or your government makes ownership "illegal"

same as it ever was...

Leopold B. Scotch's picture

"Cash on the sidlines" disucssions are irrelevant distractions.  Cash is a constant unless cash or short term debt that make up "cash" instruments like Money Markets is retired.

Otherwise, when I sell you my sideline cash for your stock, you now have sideline cash, same before and after.

In other words, "Cash on sidelines" = Fake news.

Sentiment = drives value perceptions and price OF EVERYTHING.

That's why price changes in seconds, markets crash in moments and hours.  But just as much cash remains before and after.

LawsofPhysics's picture

But DEBT is "money"...

 

You really believe that there are enough real assets to satisfy all the paper/digital claims that exist?

LOL!!!  Good luck with that!

back to basics's picture

That was quick. We went from Trump being the number one threat to the global economy to the global economy's  (and the "markets") best friend. 

Ever get the sense that the narrative is built around how central banks manipulate the markets and not how the markets respond to the narrative?

spastic_colon's picture

"Ever get the sense that the narrative is built around how central banks manipulate the markets and not how the markets respond to the narrative?"

 

nope...nada...not even once over the last 8 years / s

LawsofPhysics's picture

This time is "different"...

Specifically, this time it will be global Weimar!!!

hedge accordingly!

spastic_colon's picture

today is bang high beta day............again

 

its interesting to watch the machines give certain sectors giant selling opportunities on a rotating basis.

Hammer823's picture

Stocks have to go up over time for every pension, 401k, and government budget to work.

It's not optional.  It's required.

That's why the stock marke tis rigged to go up over time.

It always has been and always will be.

https://www.instagram.com/the_rigged_street_journal/?hl=en

LawsofPhysics's picture

LOL!!! Another half-truth...

Yes, "markets" go up and governments survive at least until the currency dies...

Plenty of examples throughout history.

same as it ever was...

Hammer823's picture

Our present day world is nothing like the historical world long past.  

Economies are compeltely interconnected.

If the United States falls.  So does the global economy.

Ain't nobody got time for that.

LawsofPhysics's picture

What humans have "time for" or "believe" is fucking irrelevant.

The consumable calories and available resources are what they are.

 

A. Boaty's picture

My solar panels paid for themselves = free calories.

LawsofPhysics's picture

Sure, but they don't manufacture or maintain themselves...

Amy G. Dala's picture

Pension funds have left liquid equities and poured into sinkhole shit like global REIT's.

Pension funds, particularly govt pension funds, they don't like anything in their portfolios that can be accurately valued at any given time.

Snaffew's picture

Meanwhile---gold and silver just got shat on over in the comex pits

ZoroAustrian's picture

I love how all the tail risks are Europe / China / Yen / GBP etc ... nothing could possibly go wrong at the rotten core of the great global financial experiment - here at home in the good ole US of A, could it?  Exceptional nation and all.  What a farce.

Calculus99's picture

If you had $1 everytime the cliche 'cash on the sidelines' was said you'd be a very rich person.

Latitude25's picture

No worries.  The central banks will just create more cash on the sidelines.  To the moon.

spastic_colon's picture

the last chart is proof that B of A is a fed apologist..........not one risk coming from our domestic decision makers.

neptune-klm's picture

If "everyone is now in", must be about time for a crash?!?!?!?!?

Snaffew's picture

let's see here...almost time for another massive bid on the buy side...DOW 20k will not be ignored...they seem to want that magic number and will do all they can to get there.  I'm looking for a big buy volume spike around 11:30 am est.  Simply to just kill as many shorts and naysayers as they can---the fiat currency will rise from the ashes like a phoenix...only to self incinerate as it breathes in trying to belch out one more devastating flame to doubters of this market.

Conax's picture

What happened to Giant Meteor?

That moron is always late.

innertrader's picture

ALL I CAN SAY, is that I've been reading ZH since about 2011 and approximately 95% of it's stock market info has been negative.

While being a TRUMP BULL, I can NOT buy this stock market.  However, rule number 1, you never get in the way of a runaway bull market and we are in one!