Below we lay out the reasons why he “remains a seller of risk.”
From his latest summary note:
Positioning…Sell Signal: our Global Flows Trading Rule triggered “sell” almost 4 weeks ago; note BofAML Bull & Bear Index now at 4.1 = 9-month high = most bullish sentiment since Jun’15;
Watch Cash level in next Tuesday’s April BofAML Fund Manager Survey (Feb = 5.6% “unambiguous buy signal”, March = 5.1%, April < 4.8% (3yr avg) would be risk-negative).
Positioning: US$ Bull Unwind: Fed-induced pullback in US$ continues to cause unwind of 2015 inflows into “strong-dollar” markets…Japan equity redemptions have lagged European equity redemptions (Charts 5 & 6).
Policy: Quantitative Failure:
a. Fed policy makers as fickle “as a feather in a storm” but key US domestic demand indicator, small business confidence trending decisively lower (Chart 4)
b. Quantitative Failure writ large across Japan/European macro
c. global bank stocks (note correlation between Japanese yen & relative performance of US financials past 12 months…both recently reflecting renewed risk aversion – Chart 3)
Profits: Upside Required: both 2016 GDP & EPS estimates continue to be revised lower (Charts 8 & 9) despite monetary policy inducing $9.1 trillion of negatively-yielding global government bonds (25% of outstanding).
We remain a seller of risk.
This article is brought to you courtesy of Tyler Durden From Zero Hedge.