Investors seeking to swim against the crowd can do so with a host of contrarian trades, according to the monthly global fund manager survey released Tuesday from Bank of America Securities.. By far, the most dominant trade on Wall Street is going long the Magnificent Seven, Investors are the most bullish they’ve been on the mega-cap tech stocks going back to October 2020, the firm found. In fact, about 69% of respondents were bullish on the group, making the Magnificent Seven the most crowded trade for 15 straight months. What’s more, in response to a question asking which assets will outperform going forward, investors responded with large-cap growth (41% of respondents), followed by large-cap value (17%), small-cap value (13%), and, finally, small-cap growth stocks (12%). .MAG7 YTD mountain Magnificent Seven However, some investors fear that betting on just a handful of high-fliers raises the risk of a sharp sell-off, and are casting about for opportunities that have greater upside potential should market sentiment turn the other way. One highly contrarian trade Bank of America identified could be going long bonds. As investors are broadly anticipating a soft landing for the economy, a recession would spur a rally in the bond market as central banks around the world lower rates. The 10-year yield was last hovering around 4.2%. Going long oil is another contrarian trade that could work as an hedge against geopolitical risk. The Wall Street firm also identified long oil and long UK-short and European Union stocks as best contrarian ideas. In terms of of consensus opinion, the money managers surveyed by BofA thought that the biggest winners from a reallocation of the more than $6 trillion invested in money market funds were most likely to be U.S. stocks (32%), government bonds (25%), global stocks (19%), corporate bonds (12%) and gold and commodities (4%).
