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Here are the most bullish trades for 2021—and, no, Bitcoin does not top the list

November 18, 2020, 10:27 AM UTC

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Good morning. Bitcoin bulls have pushed the crypto currency to a near three-year high in the past 24 hours. Meanwhile, on the equities front, Monday’s vaccine rally remains on pause as U.S. futures are mostly flat. They’re off their lows, however, following the mixed trade we’re seeing in Europe and Asia.

Stocks may be quiet this morning, but fund managers have never been more bullish. I dig into the findings of BofA’s latest survey of the portfolio pros, identifying where the money is flowing as we head into a new year. Hint: crypto is not predicted to be the top performer—not even close.

Let’s check in on the action.

Markets update

Asia

  • The major Asia indexes are mixed in afternoon trading with Japan’s Nikkei down 1.1% as the COVID situation worsens there.
  • In its final days, the Trump Administration is pushing ahead with plans to delist Chinese companies from U.S. stock exchanges. It’s not having much of an impact on Alibaba or Baidu shares; both are flat in pre-market trading.
  • Per-capita income in China is soaring. It’s expected to jump nearly nine-fold by 2025, the IMF projects.

Europe

  • For a second straight day, the European bourses were lower at the open with the Europe Stoxx 600 totally flat 90 minutes into the trading session.
  • Good news for those of you who count shipping containers to measure the health of global trade: logistics giant Maersk on Wednesday reported a stronger-than-expected pickup in business in Q3, and has raised its guidance.
  • And here’s a bit of good news for those of you looking to get away: Europe’s airlines and travel sites are seeing an upswing in bookings in recent days, coinciding with the latest progress on COVID-19 vaccine trials, suggesting some optimism in the year ahead from the jet set.

U.S.

  • U.S. futures are up a whisker. The small-cap Russell 2000 closed marginally higher on Tuesday, but the Big 3 all finished in the red as retailers such as Walmart and Home Depot led the way lower.
  • “We’re going into a difficult winter.” That’s how a Credit Suisse analyst summed up yesterday’s worse-than-expected retail sales number. Dark clouds are forming as the crucial Christmas shopping season approaches.
  • More retailers report today, including Target, Lowe’s and TJX Companies. You can follow our retail coverage here.
  • Shares in Boeing are trading 1.5% higher in pre-market trading ahead of decision day. The FAA appears set to give the 737 Max the green light later today to fly again.

Elsewhere

  • Gold is down, trading below $1,880/ounce.
  • As is the dollar.
  • Crude is flat with Brent trading around $44/barrel.
  • Bitcoin bulls are on the march. The crypto currency is trading above $18,000.

***

The “most bullish” take on 2021

Bank of America published yesterday its latest global fund manager survey, and the findings will cheer up all you bulls.

It’s the most impavid BofA report of the year. (Yes, I’m going to find every excuse I can to slip in the i-word; “impavid” is a perfectly cromulent synonym for “bullish,” I can hear that Simpsons character in my head say.)

According to fund managers polled by BofA, just about everything looks like a “buy” now.

“Bottom line,” writes Bank of America Securities chief investment strategist Michael Hartnett, it’s “the most bullish Fund Manager Survey (FMS) of 2020 on the back of vaccine, election, macro; Nov FMS shows a big drop in cash, 20-year high in GDP expectations, big jump in equity, small cap & EM exposure.”

This level of exuberance should come as little surprise. Usually, after an election cycle money flows back into the markets. That’s been the case every four years in the U.S. since the global financial crisis.

And, yet, the findings are still worth examining. Let’s zoom in on a couple of those points mentioned above.

First stop: growth. According to the survey participants, growth expectations are at a 20-year high.

And, dialing up EM—emerging markets—exposure is also a logical play as the dollar falls and more weakness is seen in the year ahead. In fact, emerging markets is viewed as the top out-performer for the year ahead, as the chart below shows.

Here’s what caught my eye: Check out oil, No. 3 on the list above, ahead of Bitcoin. Maybe there’s some generational bias at play there. But, still, crude is so beaten-down. It makes sense to think demand will inevitably rebound briskly, sending Brent and WTI higher in the year to come.

Expectations are also high for a bounce-back in corporate profits. They should be after this year’s bottom-line massacre for much of the S&P.

The vaccine news is triggering the biggest change in sentiment/strategy. Fund managers are seeing an “unambiguous rotation to EM, small cap, value, banks, funded by lower allocation to cash, bonds, staples.”

And that brings me to the most provocative line in the report: The “reopening rotation can continue in Q4, but we say ‘sell the vaccine’ in coming weeks/months as we think we’re close to ‘full bull.'”

Full bull? Is that even possible?

***

Have a nice day, everyone. I’ll see you here tomorrow. 

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

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