Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

Big fund managers bet on stocks, yield curve

Jason Goepfert
2020-11-19
Fund managers in a monthly Bank of America survey have turned highly optimistic on the prospect for stocks, but it has been a poor contrary indicator. Likewise, they're betting on small-caps and a steeper yield curve.

Each month, Bank of America releases a widely-followed survey of professional fund managers. The latest results, released earlier this week, showed that 216 managers with $573 under management are the most optimistic on stocks in more than 2 years.

The percentage of managers who are overweight equities jumped again in the past month, with more than 45% of them positioned to benefit on a rising market.

As we can see from the chart, however, this was not a good reason to bet against them. Most "smart money" surveys show at least a modest contrary bias when there is clear evidence of group-think, but that hasn't been the case so much with this particular one. The S&P 500's annualized return when the overweight percentage was 40% or higher was an impressive +22.5%, versus -1.5% when managers were underweight stocks.

The same goes for potential concern that managers have bought too much into the nascent outperformance from emerging market stocks. Managers now have more than 10% overweight toward those stocks than either the U.S. or eurozone. But other times they were relatively overweight those stocks, it didn't lead to a consistent change in the ratio of emerging markets to the S&P.

The survey is more of a contrary indicator in other aspects. For example, they're currently enamored with small-cap's prospects relative to large-caps, which has not been a great sign for the lil' guys over the past 14 years. Other times these managers decided to bet on small stocks versus large ones, the ratio of the Russell 2000 to S&P 500 turned south.

The same goes for the yield curve. These managers are currently very confident that the curve will steepen in the months ahead, but the few other times they were similarly confident, the curve promptly flattened.

Like everything, it pays to watch how these factors play out in the coming month(s). If small-caps continue to outperform (and there are signs that they should) and the yield curve continues to steepen (and there are signs it should) then we'll have some good evidence that this time is indeed different than the multiple false starts over the past decade.

Sorry, you don't have access to this report

Upgrade your subscription plan to get access
Go to Dasboard
DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.