LONDON Dec 13 Fund managers have built up their
biggest overweight position ever on bank stocks following Donald
Trump's surprise U.S. presidential election victory, a survey
showed on Tuesday.
Bank of America Merrill Lynch's monthly fund manager survey
for December also showed that global growth expectations rose to
their highest in 19 months, and corporate profit expectations
rose to the highest in six and a half years.
The monthly survey of 211 clients with $568 billion of
assets under management was conducted between December 2 and 8,
almost exactly a month after the U.S. election.
Fund managers continued to trim cash holdings. Over the last
two months they have been slashed by a full percentage point,
usually a sign of "peak greed" that the rally in riskier assets
like stocks is about to end. But not this one, BAML said. At
least not yet.
"Fund managers have pushed pause on a risk rally, with cash
balances falling sharply over the past two months," Michael
Hartnett, chief investment strategist at BAML, wrote.
"With expectations of growth, inflation and corporate
profits at multi-year highs, Wall Street is sending a strong
signal that it is bullish," he said.
Since Trump's victory, U.S. stocks have hit record peaks,
tumbling bond prices have pushed up yields to multi-year highs,
and the dollar reached a 14-year high even in the face of an
OPEC-fueled surge in oil prices.
Bank stocks have been among the biggest gainers on
expectations that Trump will loosen financial regulation. A
record net 31 percent of poll respondents are now overweight
bank stocks, up from 25 percent last month, BAML said.
Allocation to U.S. equities rose to a two-year high, and a
10-month high for Japanese shares. The month-on-month rise in
investors' Japanese equity holdings was the biggest on record,
Global inflation expectations technically slipped to the
second highest in 12 years, but second only to the month before.
And at 84 percent compared to 85 percent, the number of
respondents expecting higher prices remained elevated.
The number of respondents expecting above-trends growth and
inflation doubled to 12 percent, the highest in five years, the
survey showed. Over a third of respondents cited the "long"
dollar position as the most overcrowded trade in the world.
The biggest "tail" risks to world markets was concern of
further European union disintegration or bank defaults (29
percent), followed by a stagflationary crash in the bond market
(Reporting by Jamie McGeever; Editing by Andrew Heavens)