Bonds are rapidly approaching a major turning point and investors should pay close attention in the coming weeks. Why? A recent Bank of America survey highlighted the bearish positioning by most institutional managers: a heavy overweight in bonds proxies, such as utilities, consumer staples and REITs, and underweight exposure in equities, notably cyclicals.
My technical work continues to suggest investors are at risk of major reversals developing for which they are not positioned. An upside break-out in equities, supported by a broad-based improvement in cyclicals is taking hold while a downside move in bonds is a risk nearing reality. If they all head for the exits at once, it won’t be pretty.
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