FMS bottom line: investors bullishly positioned for permanent growth, transitory inflation & a peaceful Fed taper via longs in commodities, cyclicals & financials. 

FMS on Macro: 72% say inflation is transitory, 23% say inflation is permanent; FMS shows growth & EPS expectations have peaked but investors say investment cycle transitioning from early to mid-cycle (68% don't expect recession until 2024 at earliest). 

 

FMS on Policy: 63% expect Fed to signal taper Aug/Sept; US infrastructure hopes dip to $1.7tn (was $1.9tn); expectations for steeper yield curve lowest since Aug'20. 

 

FMS on Risk: cash levels down to 3.9% from 4.1%; BofA Bull & Bear Indicator @ 6.5; 57% say any equity correction likely <10%; inflation/taper tantrum tied for #1 tail risks. 

 

FMS on AA: allocation to bonds at 3-year low (net -69%), to stocks back up to YTD highs (61%), to commodities high & steady (27%); note long commodities overtakes long Bitcoin as most 'crowded trade'. 

 

FMS on Sectors & Regions: banks #1 sector OW, chunky cyclical (materials, industrials, UK, Eurozone) positioning persists (Chart 1), but tech saw largest June jump in exposure, while defensives exposure cut again (UW in Utilities largest since Feb'17); asked what performs best next 4 years FMS investors say (barbell of) value stocks & tech stocks. 

 

FMS Contrarians: contrarian says 'growth transitory, inflation permanent' played via long bonds-short commodities, long EM-short Eurozone, long utilities-short banks.