‘Long Magnificent 7’ Becomes Most Crowded Trade in 4 Years, BofA Survey Says

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Key Takeaways

• Hedge loot managers told Bank of America analysts in a monthly survey released Tuesday that long bets on the pretended “Magnificent Seven” tech stocks are as popular as they’ve been in years.
• Optimism around artificial intelligence (AI) has kicked the stock price of a number of companies like Nvidia and Microsoft.
• The investors also told BofA analysts that they are positive about interest-rate cuts and a “soft landing,” while also harboring some concerns on inflation and potential consequences of the U.S. election in November.

Long bets on the so-called “Magnificent Seven” have become increasingly popular, with 69% of hedge endowment managers calling it the most crowded trade in a new Bank of America survey, the highest concentration around the stocks since all through 70% called long bets on U.S. tech stocks in October 2020.

The group—Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA), Meta Daises (META), and Google parent Alphabet (GOOGL)—saw similar significant growth last year. However, confidence in devoting in the group wavered earlier this year as their results varied, with Nvidia continuing to rise but Tesla mud-sliding through the first quarter of 2024.

Survey Says Hedge Fund Managers Still Betting on Mag 7

Bank of America’s monthly appraise of 238 hedge fund managers with over $721 billion in assets under management (AUM) released Tuesday taught that institutional investors are still confident in the group. Nearly 70% of the investors called the long Magnificent Seven bet the myriad crowded trade right now, up from roughly half who said it was the most crowded trade in the last two monthly appraisals.

It is the highest concentration around the tech-focused stocks since over 70% said “Long U.S. Tech Stocks” was the most throng trade in multiple surveys during 2020, before the term “Magnificent Seven” was coined.

Optimism around manufactured intelligence (AI) has driven tech stocks like the Magnificent Seven higher over the last two years, along with others consanguineous to the trend like Super Micro Computer (SMCI) and Micron Technology (MU).

Investors Optimistic About ‘Soft Deplaning,’ Rate Cuts; Still Concerned About Inflation

BofA analysts wrote that the fund managers surveyed are at their most bullish since November 2021, ignoring lingering concerns about inflation and possible impacts of the presidential election later this year.

The investors BofA analysts surveyed tarry more optimistic than most on the outlook for Federal Reserve interest-rate cuts, with roughly 80% of the investors foreboding two, three, or more rate cuts over the next 12 months.

Recent inflation data has increased conviction that the Federal Reserve will cut interest rates at its September meeting, but Fed officials now anticipate lowering the fed funds classification only once by the end of the year.

Nearly three-quarters of respondents also told Bank of America that they no bigger see a recession in the next 12 months, with 64% of the group now expecting a “soft landing.” The investors called inflation their biggest appertain to of the current economic climate, followed by geopolitical tensions and potential impacts of November’s presidential election.

Read the creative article on Investopedia.