Global fund managers say commodities more crowded trade than Bitcoin; hike allocation to tech stocks
Bitcoin has been overtaken by commodities as the most crowded trade in June, according to Bank of America’s Global Fund Manager Survey. The latest survey data show that 26% of the respondents believe ‘long commodities’ is now the most crowded trade. The sharp switch from Bitcoin to commodities comes after the cryptocurrency tanked more than 30% between the middle of May till the end of the month. Earlier, 27% of the fund managers had sided with ‘Long bitcoin’ as the most crowded trade, now only 21% believe that to be the case.
Commodity cycle booming
Commodity prices have soared over the last few months as the global economy moved closer to re-opening. Demand has been increasing for materials, pushing prices of steel, copper, crude oil higher. Steel stocks have seen a significant rally as prices soared. Rates are expected to stay high with China cutting production for environmental reasons. Crude oil has also breached the $70 per barrel mark, hitting multi-month highs. “Allocation to commodities remained steady at net 27% overweight. The current allocation is 1.9 standard deviation above its long-term average,” BofA fund manager survey revealed.
Allocation to tech stocks increases
Additionally, the 224 fund managers with $667 billion worth of assets under management, said that technology stocks were back in favour. Investors had in May trimmed weightage in tech stocks by more than 8 basis points, in June the weights have been increased from 11% to 22%. The bet on tech stocks is not temporary. Fund managers, when asked what assets will be the best performing in the next 4 years, favoured a barbell approach of value stocks with 24% weight and tech stocks with 23% weight.
Apart from tech stocks, cyclicals are another theme playing out among global fund managers. “FMS are now significantly overweight cyclicals…with a net 30% overweight banks, a net 11% overweight energy and a net 23% overweight materials,” the report said. Meanwhile, defensives have been left out with 39% underweight utilities and a net 4% underweight staples.
Inflation only transitory
Talking about inflation, as many as 72% of the survey participants say inflation is transitory while only 23% say inflation is permanent. On the economic front, 48% of investors think the economy is mid-cycle now surpassing early-cycle. “Assuming “transitory inflation” consensus correct, “peak” in growth & profits expectations means investment cycle simply transitioning from early-cycle to mid-cycle,” BofA said.