Short European equities still ‘most crowded trade’: BAML survey


FILE PHOTO: The company logo of the Bank of America and Merrill Lynch is displayed at its office in Hong Kong March 8, 2013. REUTERS/Bobby Yip

LONDON (Reuters) – Short positioning on European equities was seen as the “most crowded trade” for the second straight month in April, a fund manager survey by Bank of America Merrill Lynch found on Tuesday.

Trade war was the biggest tail risk, according to the survey of 187 investors with $547 billion assets under management, while growth worries dominated.

Some 66 percent of investors see a “low growth, low inflation” backdrop – the highest level since October 2016.

While an inversion of the U.S. yield curve led many to predict an imminent recession, the survey found 70 percent of investors expect a global recession to start only in the second half of 2020.

A volte-face by the U.S. Federal Reserve on rate hikes helped drive stocks up this year. In the latest survey, a slim majority of investors said the U.S. Federal Reserve will not hike interest rates again during this cycle.

Allocation to global bank stocks fell to the lowest level since September 2016 – a reflection of investors’ wariness of the sector which suffers when interest rates stay lower for longer.

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