Investors Are Max Long Stocks & Bearish Commodities
The Commodity Report #186
Investors Are Max Long Stocks & Bearish Commodities
While the sentiment around the “long US equities trade” seems to be extended and due for a correction, the bearish positioning in commodities and energy is reasonable and we also expect this trend to continue for a little while.
The latest BofA fund manager survey showed how extreme the position is currently and how little cash professional investors currently have to allocate.
FMS cash level fell from 4.3% to 3.9% of AUM, matching the lowest level since Jun '21. As FMS cash level dropped below 4.0%,the BofA Global FMS Cash Rule triggered its 2 contrarian "sell" signal in 3 months.
Since 2011, there have been 12 prior "sell"signals which saw global equity (ACWI)returns of -2.4% in the 1 month aft er and-0.7% in the 3 months aft er the "sell"signal was triggered.
What I also find fascinating is how little the market priced in a recession during the first half of 2025. Especially if you keep in mind the re-inverting of the yield curve (just look at 2Y-10Y spreads).
Meanwhile, the latest CTA positioning and expected flow data in the field of commodities shows a much more diversified picture, according to UBS data. What investors actually mean if the say they’re bearish commodities can mean basically everything. Most investors view the commodity trade as a collage of oil and precious metals positions but as readers of The Commodity Report know the sector is much more diversified and broader with grains, soft and even meats to name a few other sub-sectors where we identify the best opportunities from time to time for our clients of Kucrop Analytics.
“Energy is definitely the cohort to monitor right now. CTAs are very short, have started to buy back in small size, with the pace of buying very likely to accelerate. As the same time, we anticipate some risk reduction in precious metals”, the investment bank wrote last week.
UBS 'Contrarian' trades: bullish Energy, Soybean and Lme Tin, bearish Metals, Sugarand Corn
UBS 'Go with momentum' trades: bearish Cotton and Soybean Meal
Merry Christmas
Last but not least, I would like to say thank you for every single soul that is consuming this newsletter on a weekly basis. Everything I built over the years started basically with this newsletter. While we moved our research report services and commodity-portfolio advisory services now completely to the institutional side, I can say that I will continue to put out this newsletter on a weekly basis, no matter what. This year I once again gained many new friends through sharing my thoughts and getting feedback from you guys. This is what growth should feel like. Thanks to all of you, Merry Christmas and a Happy New Year!
In Other News…
This week, look out for the following:
Durable Goods Orders data and Richmond Manufacturing Index
Trading hours are restricted and liquidity will be lower than normal during the week due to holidays
Research Service
If you’re an institutional investor, check out our research products for commodity-related futures or equities here.
Till next Monday, Lukas
If you have any questions in the meantime, please feel free to contact me via X or Mail.