BofAML Survey: Long Emerging Markets Cited As Most Crowded Trade For First Time Ever

The survey of 218 participants with $625bn of assets under management ran between 1-7 February and found 18% of respondents said long EM was the most crowded trade.

This marks a major turnaround from last month's survey when short emerging markets was cited as the third most crowded trade in the market.

Long US dollar was the second most crowded trade this month according to 17% of respondents while 14% refered to long FAANG+BAT, the lowest level on record.

A full-blown trade war between the US and China was named as the biggest tail risk for the ninth straight month in a row with 29% highlighting this.

A slowdown in China (21%) was the second biggest market risk and a corporate credit crunch (12%) was third.

Elsewhere, allocations to cash hit the highest overweight since January 2009, jumping 6 percentage points (ppt) to net 44% overweight.

Meanwhile, managers' allocations to global equities fell 12ppt to just net 6% overweight, the lowest level since September 2016.

Despite the recent rally, net 46% of respondents expect global growth to weaken over the next 12 months with secular stagnation the consensus view among managers as 55% are bearish on the outlook for both growth and inflation next year.

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Michael Hartnett, chief investment strategist at BofAML, commented: "Despite the recent rally, investor sentiment remains bearish. Fund managers' positioning is still a Q1 positive for risk assets."