'Long Magnificent Seven' is now one of the most crowded trades on record, new poll shows

By Louis Goss

Hedge funds have continued to double down on the 'Long Magnificent Seven' trade, according to a new survey of hedge funds with $721 billion in assets, which shows the bet on top technology companies has now become one of most crowded trades on record.

The 'Long Magnificent Seven' trade has kept its spot as the most crowded trade for the 15th month in a row, according to Bank of America's Global Fund Manager Survey, which shows 69% of fund managers now view it as the most crowded trade, versus just 51% in May.

The bet on the seven high-performing tech stocks is now viewed as more crowded than any comparable trade since the 2020 dotcom rally when fund managers repeatedly cited 'Long U.S. Tech' as the most crowded trade, including in July (74%), September (72%) and October (80%) that year.

Shares in all the Magnificent Seven tech companies - Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), and Nvidia (NVDA) - apart from Tesla (TSLA) are up significantly in the year-to-date.

Similar levels of crowding were previously only seen on two other occasions in the history of Bank of America's survey, in relation to the 'Long U.S. Growth Stocks' trade, which was cited as most crowded by 72% of money managers in June 2020, and to the 'Long US$' trade which also hit a rating of 72% in February 2015.

"There have only been a handful of times when a single trade was more crowded in Fund Manager Survey history," Bank of America said in its June report on its monthly poll of money managers, which it first started in 2011.

Fund managers also said they are now more bullish than at any point since the 'Blue Wave' of November 2021 in the wake of Biden's election as U.S. president, as 64% of the money managers surveyed said they now expect to see the global economy achieve a 'soft landing' over the next 12 months, up from just 56% in May.

At the same time, fewer money managers said they expect the world will experience a marked economic slowdown compared to last month, with just 5% predicting a 'hard landing' scenario, compared to 11% in May.

Softening concerns about the possibility of a 'hard landing' scenario saw it fall to fourth place on the list of money managers' top worries, as fund managers instead said they are now much more concerned about risks linked to geopolitics and the upcoming U.S. elections.

Higher inflation remained the top most cited risk, with 32% of investors citing it in June, down from 41% in May. Geopolitics took second position, with 22% naming it as the top risk, up from 18% in May, as concerns around the U.S. elections took third place with 16% citing it as the leading risk, up from 9% in May.

In relation to the impact of the upcoming U.S. elections this November, fund managers said trade policy was the most likely policy (38%) area to be impacted, ahead of geopolitics (20%), immigration (13%), taxation (9%), government spending (7%) and energy (6%).

-Louis Goss

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06-18-24 0726ET

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