The accompanying chart shows that a net 10% of global fund managers are underweight emerging market (EM) equities, according to the Bank of America-Merrill Lynch (BofA-ML) survey of fund managers for September. Last month, the underweight was a net 1%.
Allocation to US equities climbed to a net 21% overweight, the highest since January 2015. Accordingly, the most contrarian trade, says the BofA-ML survey report, is long EM vs short US.
It is interesting though that fund managers believe growth is slowing, with 24% expecting global growth to decelerate in the next 12 months, the worst outlook since December 2011. Global optimism is at a six-year low. Trade wars and a Chinese slowdown are cited as the biggest tail risks. Small wonder that cash with global fund managers, at 5.1%, is at an 18-month high.