Research Summary
This report discusses the latest BofA Global Fund Manager Survey, the bearish reaction function that is bullish for stocks, the divergence between the no-landing consensus and priced in Fed cuts, and a look at a cheap Emerging Market (EM) with an actionable way to play it. It also highlights the rapid rate at which investors are dumping EMs, despite the potential value in select markets such as Brazil.
Key Takeaways
BofA Global Fund Manager Survey
- Survey Summary: The report provides a summary of the latest BofA Global Fund Manager Survey, highlighting the current market expectations, cash levels, and equity allocations.
- Market Sentiment: Despite the narrative pendulum swinging in favor of the bulls, there is still room for further movement.
- Hedge Fund Exposure: The Hedge Fund Exposure index from SentimenTrader is hitting fresh multi-year lows, often corresponding to a market bottom.
Market Trends and Predictions
- SPX Pattern: The SPX is in an outside-inside-inside breakout pattern on the weekly chart, indicating a compression regime that could lead to trends.
- Economic Predictions: The majority of participants are betting on no landing or soft landing scenarios for the economy, which could impact the timing of future cuts.
- Yield Lead Charts: Yield lead charts are trending sideways and have turned neutral, indicating a Bear Volatile regime for bonds.
Emerging Markets
- Investor Behavior: Investors are dumping emerging markets at a record rate, despite potential value in select markets.
- Brazil’s Market: Brazil’s market was one of the better performing global markets last week, and its relative PE to MSCI Emerging Markets trades near a historical discount to the index.
- EWZ’s Holdings: The largest weight in the index is EWZ, a global producer of metals, which is trading cheap and appears to be preparing for a big move.
Actionable Insights
- Market Opportunities: Despite the current trend of investors dumping EMs, there are potential opportunities in select markets such as Brazil.
- Investigate the Potential: The SPX’s current pattern suggests a potential breakout to the upside, which could present opportunities for investors.
- Monitor Yield Trends: The current Bear Volatile regime for bonds suggests that investors should closely monitor yield trends for potential shifts.
