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Fund managers are long tech and growth…again

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It’s that time of the month again for a report from the hedgie whisperers at Bank of America. Yes, the global fund manager survey has been released and not a moment too soon as the equity markets scream: “everything has returned to normal”.

Two months ago when markets were in meltdown mode and Alphaville spent most evenings gawping at double-digit drops in every major asset index whilst trying to socialise on Zoom, fund managers were, to no one’s surprise, pretty bearish.

The most crowded trade over Easter? Long US Treasuries. After all, it’s hard to imagine a world in which the probability of America defaulting is higher than your generic corporate. (Unless Trump begins to think it’s a good negotiating tool in his spat with China, which is plausible.)

Well don’t worry because, as you may have noticed, the flight to safety lasted only a brief moment and we’re now back at the “buy stocks hand-over-fist” phase of this new bull market despite, we should add, a pandemic still raging across most of the globe.

Which stocks? US tech and growth stocks, duh, what else:

We’re pretty sure that businesses depend on revenues, and revenues depend on consumers spending, or the promise of them spending anyway, and with US jobless claims topping 40m today, you do wonder just where those revenues are going to come from.

But then again, if interest rates have moved to near zero, and on your discounted cash flow model more than the entire value of a high-growth business is generated beyond Year 10 (in analyst’s parlance, this is know as the Terminal Value), perhaps a global pandemic really is just a fly in the ointment.

More in the usual place.


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