Global fund managers turn uber-bullish as stock rally rolls in to mid-December
If you want a sense of how frothy things have become, look no further than the December Bank of America Global Fund Manager Survey. This is a survey of roughly 250 global fund managers and is a very good gauge of sentiment among fund managers. They are typically the most bearish at bottoms and most bullish at tops. I have rarely seen a more bullish crowd. They have bought into the soft landing big-time. And who could blame them? The Fed pivot last week gave them an all-clear signal. How bullish are they? Seven out of 10 believe the “soft” or “no” landing is happening. Cash as a proportion of their portfolios stands at just 4.5%, a two-year low. Virtually all of them (91%) say the Federal Reserve is done hiking rates. Almost nine in 10 (89%) expect lower rates next year. Optimism that earnings are improving is now at the highest level since February 2022. Not surprisingly, the “most crowded trade” is long Magnificent Seven stocks (49%) and short China stocks (22%, with a China real estate implosion seen as the #1 credit risk). Remember: These are sentiment indicators, so when they are at extremes of bullishness (as they are now), they usually indicate the investing crowd is “all-in” and most would view this as a sign of at least a short-term top. Speaking of exuberance: Dow up 8 straight days Meantime, StoneX global head of research Matt Weller noted a rare occurrence: the Dow Industrials closed higher Monday for the 8th consecutive day to hit a record high, an event that we’ve only seen 42 times in the average’s 127-year history, he says. That’s about once every three years. And it’s up again Tuesday. Looking at how the Dow trades after this rare win streak, you’d think there would be some kind of pullback, but not in the short run. Forward returns have been generally strong, Weller says, especially over a 1- and 3-month period. 1-month average returns: 1.9% (vs. 0.6% in all 1-month periods) 3- month average returns: 3.3% (vs. 1.9%) 1- year average returns: 7.5% (vs. 7.9%) Source: StoneX While 8-day streaks are rare, the Dow has done even better. Last July, th e Dow broke a 13-day winning streak , the likes of which were last seen in 1987. Still, the latest run in the Dow has been epic. It’s currently at an RSI (Relative Strength Indicator, a gauge of momentum over the past 14 trading days) of 85. While 70 represents overbought levels, anything over 80 is historically unsustainable and implies the Dow is due for a pullback, or will at least stop going up.
Aniket Pujari
6,160 PostsAniket Pujari is a passionate finance and technology enthusiast with a strong academic background in Financial Markets. Since 2015, he has been deeply immersed in the world of cryptocurrencies, blockchain technology, and global financial systems, building a wealth of knowledge and expertise in these rapidly evolving fields.
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