FNArena’s Weekly Insights – January 25 2021

In this week’s Weekly Insights:

-Why Worry?
-Conviction Calls

By Rudi Filapek-Vandyck, Editor FNArena

Why Worry?

As reported in earlier updates, I returned from holidays thinking this market is way too confident, way too bullish, and way too exuberant on numerous accounts. Turns out, market strategists at Bank of America (short cut BofA) are in full agreement.

BofA’s latest global fund manager survey suggests institutions the world around have fully embraced the 2021 re-opening & economic recovery trade, using defensives, quality and growth stocks as the funding source to stock up on miners, energy companies and banks.

Emerging Markets have become the new Go To destination. Elsewhere it’s small cap stocks. And now average cash holdings (at 3.9% as at mid-January) are at their lowest level since March 2013.

On BofA’s own experience, when cash levels are this low the odds for an imminent correction shorten significantly. Hence, no surprise, the January update of the BofA global find managers survey comes with the warning: market correction could be imminent.

Other indicators from the same survey show overall sentiment is firmly “bullish” while expectations for global EPS growth, a pick-up in inflation and a rise in bond yields are at or near all-time highs in the history of the survey. For the first time since October 2019 being long technology stocks is no longer the most crowded trade with the survey revealing the most crowded trade is now being long Bitcoin.

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