Trading ideas and investment strategies discussed herein may give rise to significant risk and are not suitable for all investors. Investors should have experience in relevant markets and the financial resources to absorb any losses arising from applying these ideas or strategies. >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst under the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions. BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 23 to 25. Global Fund Manager Survey My Herd is my Bond BofA January Global Fund Manager Survey Bottom Line: Fund Manager Survey (FMS) respondents are very optimistic on rate cuts and macro “soft” landing but Jan cash levels are up from 4.5% to 4.8% as bond market optimism tempered, and bonds driving the “herd”; BofA Bull & Bear Indicator up to 5.5, highest since Nov'21, positioning not contrarian +ve; new catalysts (e.g. global growth) required for upside. On Macro: FMS investors least pessimistic on global growth since Feb'23, on profits since Feb'22; “soft/no” landing say 79% vs. 17% say “hard” landing; in contrast, for 1st time since May’22, investors expect China growth to weaken. On Rates, Crowds & Tails: both bond & equity investors say Fed #1 driver of price in ’24; record optimism on rate cuts (just 3% expect higher rates), but dip in optimism on bond yields; most crowded trade “long Magnificent Seven” & “long-duration tech” best way to play rate cuts, no longer “long 30-year Treasury.” On AA, Regions & Sectors: rotation out of bonds into cash, out of banks into REITs (12-month high); global equity OW trimmed but largest OW in US stocks since Dec'21; mass preference for “high-quality” but 1st time since Jun’21 small-cap preferred to large. FMS Contrarian Trades: contrarian longs: China, Europe, banks, energy, low-quality stocks, all “soft landing” catch-up plays; contrarian shorts: bonds, US, the Magnificent Seven, vulnerable to “hard” & “no” landing outcomes. Chart 1: “Long Magnificent Seven” is the most crowded FMS trade What do you think is currently the most crowded trade? Source: BofA Global Fund Manager Survey BofA GLOBAL RESEARCH 55724520102030405060Short REITsLong 30-year TreasuryLong Japan equitiesShort China equitiesLong Magnificent SevenJan-24Dec-23Nov-23Oct-2316 January 2024 Investment Strategy Global Michael Hartnett Investment Strategist BofAS +1 646 855 1508 michael....
