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BAML Survey: Most Crowded Trade for Fifth Month in a Row

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BAML survey: FAANG + BAT, most crowded trade

In the previous part of this series, we saw that fund managers have turned overweight on the United States after a 15-month gap. What’s more interesting is that it’s despite the so-called FAANG[1. Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), Google (GOOGL)] and BAT[2. China’s Baidu (BIDU), Alibaba (BABA), Tencent (TCEHY)] stocks being identified as the most crowded trade. According to a BAML (Bank of America Merrill Lynch) survey, in June, FAANG plus BAT was identified as the most crowded trade for the fifth consecutive month.

Long US dollar (UUP) and short US Treasuries (TLT) remain the second-most-crowded trade. Expectations of a tighter monetary policy by the Federal Reserve is supporting this trade.

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Stretched equity valuations

As we saw in Which Risks Do Top Money Managers Want You to Hedge with Gold? Mark Yusko, CEO of Morgan Creek Capital Management, is concerned about the Fed’s role in the economy. He said the policies pursued by the Fed and a devalued currency have led to record-high valuations in the equity markets.

There is a persistent concern in the markets regarding the stretch in valuations of US equity markets, especially tech stocks, which include FAANG stocks. While it’s difficult to say if the high valuations are due to a bubble or are supported by future earnings growth, it’s true that investors are growing wary of the bull run. Yusko suggested adding gold (GLD) and gold miners as a hedge against such risks.

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