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For the first time in nearly a year, going long the top U.S. and Chinese tech stocks is not the most crowded trade identified by respondents in Bank of America’s (NYSE: BAC) monthly poll of 190 Wall Street money managers with a combined $575 billion in funds under management.
The FAANG trade “is no longer the most crowded trade” as the five stocks that make up the acronym—Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), and Google-parent Alphabet (NASDAQ: GOOGL, GOOG)—have all fallen into a bear market or are very nearly there.
Instead, investors are long the U.S. dollar and piling into bonds in record numbers as the global sell-off in equities continues. They are also shorting emerging markets as a stronger dollar spells bad news for those markets.
“Investors are approaching extreme bearishness. … This month’s survey [found] the biggest ever one-month rotation into the asset class” of bonds, said BofA of the survey, one of the most watched surveys of investors on Wall Street.
The report also cited that more than half of the respondents believe global economic growth will weaken over the next year, which is “the worst outlook on the global economy since Oct. 2008,” the survey said.
Their biggest concern? The trade war is keeping these money managers up at night for the seventh straight month in a row. Worsening economic conditions in China was another big risk investors are worried about.
Bank of America’s report comes as the market is headed toward the worst December for stocks since the Great Depression. It also comes on the heels of the JPMorgan Asset Management team’s assessment for 2019 which noted that investors will be better off with assets like cash and Treasuries than with the S&P 500 Index next year.
“Our cash and duration overweights really distill down to overweights in U.S. cash and Treasuries, where ex-ante Sharpe ratios are now well ahead of those for U.S. stocks for the fist time in a decade” said John Bilton, head of global multi-asset strategy at JPMorgan Asset Management, where “Sharpe ratio” refers to the measure of an asset’s performance relative to its volatility.
Here are the full results of Bank of America’s December survey: