“Sell The Vaccine”: Euphoric Wall Street Goes “Full Bull” As Optimism Hits 20 Year High, Prompting BofA To Turn Bearish
Last Friday we reported that after looking at the wave of euphoric bullishness sweeping across on Wall Street sparked by a combination of a (newly) bullish lack of a blue wave coupled with imminent vaccine hopes, BofA’s Chief Investment Officer stood out amid the crowd of Wall Street cheerleaders and urged the bank’s clients to “Sell the Vaccine“, to wit:
“we are sellers-into-strength into vaccine in coming months…peak positioning, peak policy, peak profits likely coming months; best analog is 2018 when US tax cuts caused peak positioning, policy, profits early that year; 2021 (vaccine) sees early peak in asset prices on higher interest rates; watch XHB, RPAR, HYG, DXY for signs rate rise becoming disruptive.”
Fast forward to today, when Hartnett’s conviction only increased with the release of the latest, November, Fund Manager Survey which polled 216 panelists with $573BN in AUM, and which according to Hartnett – who also organizes the poll – was “the most bullish Fund Manager Survey (FMS) of 2020 on the back of vaccine, election, macro; Nov FMS shows a big drop in cash, 20-year high in GDP expectations, big jump in equity, small cap & EM exposure.”
And since the findings merely underscores what he had already discussed last week, his assessment of the current euphoria mood is that “reopening rotation can continue in Q4 but we say “sell the vaccine” in coming weeks/months as we think we’re close to “full bull.”
Specifically, according to the survey conducted Nov 6 through Nov 12, investor optimism about stocks soared to the highest level since January 18 (net 46%) as a “topping process gets underway” (extremely bullish >50%), while contrary to some false media reports that investors remain on the sidelines, hedge funds’ equity exposure remains high (41%).
The survey also found that the “fully bulled” up managers were going all in the the value rotation, deploying more money into emerging markets, small-cap stocks and the banking sector on hopes a COVID-19 vaccine will turn around these hard-hit market segments.
When asked what their 3 favorite trades for 2021 were, FMS investors said 1) long Emerging Markets, 2), long S&P500, and 3) long oil.
Even as they self-reportedly rotated into value, FMS investors still regarded long tech as by far and away most “crowded trade” in Nov’20, the 7th consecutive month.