Even as the 244 respondents to the latest BofA Fund Manager Survey (who manage $724BN in AUM) plowed into US equities, as their September allocation to US stocks rose again, up 2% to 21%, the highest since Jan '15, making the US the most favored equity region globally for the second month running, amid bets the record divergence between the US and the rest of the world will continue for the indefinite future (or simply hoping upward momentum persists).
According to BofA, as a result of tax cuts, fund managers now have the most favorable profit outlook on US corporate profits on record, offset by a tumbling outlook on EM profits.
Big 3 contrarian FMS trades: our view remains cyclically defensive as Fed tightening in late-cycle; but Sept FMS inputs send BofAML Bull & Bear Indicator lower to 3.5 = 3-6 week risk asset pain trade up; most contrarian trade is long EM vs.
short US; long materials vs.
short healthcare also works if China stimulus becomes more visible in Q4.