Investors started last year full of optimism and ended it surrounded by doom and gloom. This year seems to have started in a bleak mood. So how likely is it that it will end on a positive note?
Investors’ optimism remained at very high levels, despite the beginning of tapering of quantitative easing by the European Central Bank (ECB), tensions with North Korea and the Catalan crisis.
The euro is at its cheapest since April 2003 following the European Central Bank’s various monetary easing measures, according to a survey of fund managers by Bank of America Merrill Lynch.
Investors are extremely bearish, with the start of 2016 shaping out to be the worst ever for many stock markets around the world.
An investor survey showed such “unambiguous pessimism,” that either risk assets are ripe for a rally or the markets are positioning for a recession and/or an imminent debt default, according to Bank of America Merrill Lynch research, which carried out the survey.
Being long US dollar is the most overcrowded trade for August, while this month the pound is the most overvalued since November 2008, a survey of fund managers showed.
If you are a contrarian, your best bet for July would be to go short banks, as a fund managers survey by Bank of America Merrill Lynch revealed there was a record long in global banks in the month.
Forecasts about the euro’s exchange rate against the dollar and other currencies are made even more difficult than usual by the increasing danger that Greece will have to exit the eurozone.
Capital flows showed a “bond massacre” is underway, with the largest weekly outflow from bond funds in 18 months, according to Bank of America Merrill Lynch.
Equities saw their largest inflows in 11 weeks in the week that ended on June 3, with the contrarian “buy” signal triggered in early January still in place, data from Bank of America Merrill Lynch showed.