Tuesday, 16 June 2015

And the average fund manager says...

Yes it is that time of the month again for all fund management industry watchers as the BoA-Merrill Lynch Fund Manager survey hits town.  It is fair enough that putting your hands on a copy is harder than ever but with all due reference to the content providers here are a few of the graphics that I have managed to get hold of...plus a few thoughts of my own surrounding them.

Well when Mr Draghi in the most recent ECB interest rate decision press conference tells you to anticipate volatility...that is what you logically do.  Funny how yesterday I sold my long EU volatility positions at a pleasant profit...  Quite amazing to see how little H2 2008 volatility protection there was...

The anti US dollar love is high and after touching 100 the DXY (trade weighted US dollar) is now trading at a more reasonable 95 and change.  For what it is worth I think euro/US dollar is about right here. If you are looking for crowded trades then high yield or the Chinese stock market are probably more sensible places to look.
 Fair enough...I guess my preferred scenario of some some sort of Greek reform/restructuring bundle has element of the first two bars
Again personally thinking I don't think the Federal Reserve should raise rates BUT I guess the bigger insight is that we are a long distance from normalisation.

Frankly volatility is probably now more apparent if the Fed don't raise rates in September and people ask why (if pushed my personal preferred scenario):

 Following on from the above, the 'behind-the-curve' option is simply laughable.  Geopolitics is, of course, an easy catch-all (but quite sensible).  Striking new entry from 'Eurozone breakdown'!  The Eurozone being ranked ahead of China as a source of volatility is certainly correct.

So what do you then?  Well you build up cash...

A bit like the volatility statistics though above if this is the prevailing thought then you should be looking for opportunities to put cash to work now in the bouts of volatility.  

And additionally?  A few copies on the report were also passed to me including the stock selection friendly observation (because others are not really taking views) about Europe that: 

 Shorts across the SXXP are 28% below YTD highs and 42% below the 12 month high. Market is being led by reduction in longs and top down hedging...

On a similar basis the emerging markets are a good place to look as others are not:

The proportion of investors expecting to underweight global emerging markets surges to a net 21 percent from net 6 percent in May.

So lots of insights but the consensus is telling me that during the summer the trick is to be more active despite it maybe feeling uncomfortable to be so as the beach calls.  

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