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The most crowded trade on Wall Street is "long China equities," according to the latest Bank of America Fund manager survey. Twenty-one percent of respondents to the February survey said that was the investment with the most enthusiasm... perhaps too much. Still, the "most crowded" trades in the survey, which is among the most followed on Wall Street, can stay that way for long stretches. Long China displaces "long U.S. dollar," which was the most crowded trade for the prior seven months in the survey. Long tech stocks, and growth stocks generally, dominated the list from 2018 to 2022. The Invesco Golden Dragon China ETF is up 15% this year following a 25% decline in 2022 and 42% plunge in 2021. China equities traded in the U.S. were under pressure for a number of reasons, including the country's Covid lockdowns, as well as tighter scrutiny of its homegrown internet businesses. Both concerns have eased this year. The top holdings in the Invesco China ETF are Baidu , Alibaba , Pinduoduo and JD.com . The gain in the U.S. dollar has slowed this year on signs of easing inflation and as the Federal Reserve dialed down its rate-hiking campaign. Rest of the survey Among the other key conclusions from the survey are a decline in recession expectations. Just 24% of fund managers are saying a recession is likely in the next 12 months, down from a high of 77% last November. Forty percent of respondents see the biggest tail risk as inflation staying high. Overall, respondents are still pretty pessimistic however, keeping 5.2% in cash, down only slightly from the prior survey. Also fund mangers are still net 31% underweight equities. Based on the survey, Michael Hartnett, investment strategist with Bank of America, takes a contrarian view and believes the "pain trade" is still for stocks to keep rising. Investors are "nowhere near optimistic enough to" recommend selling stocks, Hartnett stated. The monthly survey polls 299 panelists with $847 billion under management.
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February 14, 2023 at 10:00PM
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There's a new most crowded trade on Wall Street — and it's not in the U.S. - CNBC
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