In articles presented over the past several months, Bank of America’s monthly Fund Manager Survey has turned out to be prescient and instrumental in understanding the mechanics of market behaviour. In this month’s survey, a majority of respondents indicate that they expect inflation to go down over the course of the next year but they don’t expect lower short-term rates.
Of course, for lower inflation to become prevalent, one means is a recession. Survey respondents show the highest conviction since the COVID-derived highs in April 2020 that a recession is likely with convictions on the possibility of companies improving their balance sheets showing a slight dip.
Therefore, the consensus view among the survey respondents is that there will be « stagflation »: below-trend growth tied with above-trend inflation.
Cash levels, i.e. the percentage of Assets Under Management held ready to be disposed off for loss reduction remains above 6% but tech stocks. The tech sector – the largest beneficiary of breakneck price growth in an era awash with money – were reported as being the least favourite among the survey respondents, who indicate that November has tech being the most underweight of choice since 2006.
In a report released by Morgan Stanley in October, surveys analyzing shoppers’ tendencies indicated that most shoppers won’t be buying during the holiday season if prices were to increase.
However, over 65% of the respondents indicated a willingness to buy if there were discounts over 20%.
As a result, the U.S. National Retail Federation expected a modest rise of 6-8% in sales which, when accounting for inflation, would have meant lower sales by volume.
While traffic to malls may have been thinner than expected according to Reuters, web traffic remained robust. According to Adobe Analytics, shoppers in the U.S. spent a record $9.12 billion on Black Friday sales online.
However, the analytics indicated that it was steep discounts that drove sales to a year-on-year (YoY) gain. Mostly, electronic goods and toys were scooped up by shoppers after heavy discounts were applied.
This explains why FMS survey respondents were so wary about companies being able to improve their balance sheets: with discounts come lower profit margins.
Mastercard’s SpendingPulse forecasted a 15% jump in sales on Black Friday overall, led by an 18% rise for in-store retail sales. Net sales were below these estimates at 12% and 14% respectively. Overall, crowds in the malls have been thinner and the driving force of sales have been discounts. A large portion of sales in this holiday season is estimated to be for the purposes of inventory reduction as retail stores and e-commerce companies improve their balance sheets: both Amazon and Shopify have laid off staff in the past couple of months. News reports indicate that Amazon intends to cut a further 10,000 jobs with recent « workplace optimisation » programmes in their India operations attracting the ire of the government for improper termination, i.e. without cause or adequate compensation. Legal notices have been sent; if found guilty, the consequences can be severe.
This highlights the weakness in the consumer discretionary sector as evident in the Fund Manager Survey. Between the standard defensive sectors – healthcare and consumer – respondents indicated that they were overweight in favour of « healthcare » over « consumer ».
For 18 months now, respondents have been overwhelmingly overweight in the energy sector.
This is evident in net positioning as well: « cash », i.e. a readiness to divest, and healthcare are on top while consumer discretionary and tech are being considered with a heavily bearish outlook.
Overall, the Purchasing Managers’ Index – a key factor in the determination of economic productivity – has a net forward outlook trending downwards with rising wealth levels in Emerging Markets giving their PMI a slight push upwards.
All in all, it sounds like a sound strategy to consider leveraging the bearish outlook on tech and the broad market.
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Violeta a rejoint Leverage Shares en septembre 2022. Elle est chargée de mener des analyses techniques et des recherches sur les actions et macroéconomiques, fournissant des informations importantes pour aider à façonner les stratégies d’investissement des clients.
Avant de rejoindre LS, Violeta a travaillé dans plusieurs sociétés d’investissement de premier plan en Australie, telles que Tollhurst et Morgans Financial, où elle a passé les 12 dernières années de sa carrière.
Violeta est une technicienne de marché certifiée de l’Australian Technical Analysts Association et est titulaire d’un diplôme d’études supérieures en finance appliquée et investissement de Kaplan Professional (FINSIA), Australie, où elle a été conférencière pendant plusieurs années.
Julian a étudié l’économie, la psychologie, la sociologie, la politique européenne et la linguistique. Il possède de l’expérience en matière de développement commercial et de marketing grâce à des entreprises qu’il a lui-même créées.
Pour Julian, Leverage Shares est une entreprise innovante dans le domaine de la finance et de la fintech, et il se réjouit toujours de partager les prochaines grandes avancées avec les investisseurs du Royaume-Uni et d’Europe.
Oktay a rejoint Leverage Shares fin 2019. Il est responsable de la croissance de l’activité à travers des relations clés et le développement de l’activité commerciale sur les marchés anglophones.
Il a rejoint LS après UniCredit, où il était responsable des relations avec les entreprises pour les multinationales. Il a également travaillé au sein de sociétés telles qu’IBM Bulgarie et DeGiro / FundShare dans le domaine de la finance d’entreprise et de l’administration de fonds.
Oktay est titulaire d’une licence en finance et comptabilité et d’un certificat d’études supérieures en entrepreneuriat du Babson College. Il est également détenteur de la certification CFA.
Sandeep a une longue expérience des marchés financiers. Il a débuté sa carrière en tant qu’ingénieur financier au sein d’un hedge fund basé à Chicago. Pendant huit ans, il a travaillé dans différents domaines et organisations, de la division Prime Services de Barclays Capital à l’équipe de recherche sur les indices du Nasdaq (plus récemment).
Sandeep est titulaire d’un master spécialisé en finance et d’un master en administration des affaires de I’Institut de technologie de Chicago.
