The Fed's (and the president's) obsession with pushing stocks to all time highs has succeeded: the S&P is trading well above 3,000 (much to the chagrin of Morgan Stanley), and if it was Powell's objective to also get everyone invested in the biggest asset bubble of all time, he is certainly making headway.
As we reported yesterday, both retail investors...
... and hedge funds...
... are gradually capitulating, and together with systematic, risk-parity funds...
... and CTAs...
... are pouring ever more cash into the stock market.
Today - Fund - Manager - Survey - Bank
Today, the latest Fund Manager Survey published by Bank of America's Michael Hartnett cemented these observations, and as BofA notes, this month’s survey "found investors have added risk, rotating into cyclical plays (equities, Europe, industrials, banks) and out of defensive ones (bonds, REITs, utilities, staples)"
As a result, the average cash balance fell to 5.2% from 5.6%, if still above the 10-year average of 4.6% as investors’ allocation to cash ticks down 2ppt to net 41% overweight, also well above the long-term average. As Hartnett reminds us, the FMS "Cash Rule" has been in "buy" territory for the past 17 months.
Reversal - Sentiment - May - Drop - June
The reversal in sentiment following the May drop and the June surge, is most evident in the allocation to global equities which has retracted almost all of last month’s dip, rising 31ppt to net 10% overweight.
So with market professionals and retail investors, capitulating and jumping into the (boiling) pool, to mix metaphors about Wall Street and frogs, one would assume that investors are delighted by what is going on, perhaps?
Fact - Investors - Fear - Loathing - Hartnett
Wrong: in fact, one can best describe the investors mood as "fear and loathing", with Hartnett noting that there is "No champagne for SPX 3000", for several reasons:
Nobody expects growth, making the recent equity spike artificial and entirely on the back of central bank multiple expansion. As BofA writes, "FMS global...
Wake Up To Breaking News!
Sometimes I Wake Up Grumpy. Other Times I Let Her Sleep