Every month, we review the latest BAML survey of global fund managers. Among the various ways of measuring investor sentiment, this is one of the better ones. These managers oversee a combined $700b in assets.
Overall, fund managers are extremely bullish on risk. In August, they further reduced their exposure to bonds (57% underweight) and increased their exposure to equities (56% overweight). Fund managers equity weighting is now in the top 5% since 2007.
Managers are now overweight the US equities by 30%, an increase of 5 percentage points in the past two months. They were 3% underweight the US in January, for comparison. Managers increased Europe to 17% overweight, the highest in 5 and 1/2 years, from just 3% in July. They decreased Japan to 19% overweight from 27% last month. Meanwhile, emerging markets are now 19% underweight, the lowest since the survey began in 2001.
You can see from the data that it should be looked at from a contrarian perspective. Fund managers were overweight EEM more than any other market at the start of the year, and it has been the worst performer so far. They are now bearish EEM, so keep it on your radar. In comparison, they were 20% underweight Japan in December and it has been the best equity market in 2013.
The US is now the largest consensus long. In the history of the survey, the current weighting is the third highest. This is consistent with the AAII asset allocation survey and fund flow data showing July to be the largest inflow into equity funds and ETFs ever.
Survey details are below.