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November BAML Survey: How Fund Managers Are Playing the Markets


Nov. 14 2018, Updated 3:45 p.m. ET

BAML survey and fund managers

BAML (Bank of America Merrill Lynch) conducted a survey that polled 225 global investors with $641 billion in total assets under management between November 2 and November 8.

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Allocation to US stocks surge

The equity allocations to US stocks increased by 10% to a net 14% overweight in November. The US once again emerged as the most favorable region for investors. The earnings momentum for US companies is still going strong. Moreover, on average, investors expect the S&P 500 (SPY) to rise another ~12% before peaking. The performance divergence between the US and the rest of the world continues. The MSCI Emerging Markets Index is trading with a YTD loss of 17.0%, while the S&P 500 (SPY), the Dow Jones Industrial Average (DIA), and the NASDAQ Composite (QQQ) have risen 4.1%, 5.1%, and 10.1% YTD as of November 9, respectively.

Emerging market equities attract interest

In November, fund managers lapped up emerging market equities (EEM) in addition to US equities. The sell-off in emerging markets might have tempted investors to go bargain hunting in equities from these regions. Fund managers increased their positions by 8% to 13% overweight in emerging market equities.

Many market veterans including Mark Mobius are also suggesting investors buy emerging market stocks. While emerging market stocks sold off due to the rising US dollar (UUP), rising US interest rates (TLT), escalating trade tensions, and rising oil prices, they seemed to have stabilized lately. Some countries including Brazil (EWZ) and India (INDA) have even seen a rebound. Moreover, the fall in emerging market equities led to attractive valuations, which has encouraged investors.


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