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The majority of surveyed investors expect a mild recession to start either in 4Q22 or 1Q23, while bets on soft landing surged to 68%, which is much higher than the 21% expecting a hard landing scenario.
“Current policy regime of “loose fiscal-tight money” most extreme since 2008; biggest “tail risk” still inflation/policy mistake (45%) then credit crunch (18% was 35% in Apr); CRE (40%) seen as most likely catalyst for “credit event”,” the strategists wrote in a client note.
When it comes to the impact of AI on businesses, 42% said that see companies making higher profits. Along these lines, EPS expectations are least pessimistic since February of last year.
As far as portfolio allocation is concerned, investors are the most Underweight commodities in over 3 years while the allocation to stocks is the highest in the last 7 months.
Tech leads the way with “long Big Tech” now the most crowded trade (59%), ahead of “long Japan” (14%).
“Big short-cover in US stocks (from 44% to 10% UW); 1st UW Eurozone YTD; biggest OW global industrials since Feb’22; biggest drop in healthcare since Jan’21; contrarians would go long commodities, banks, REITs & short tech, industrials, Japan,” the strategists added.
