17.12.25 - A data point better not to ignore

Yesterday, the latest released Bank of America Fund Manager Survey (FMS) shows cash allocations dropping to 3.3% in December, the lowest level on record. This signals extremely high risk appetite and heavy positioning in equities.

Markets: Markets appear largely unbothered by this data point. Equity indices continue to trade near record highs, volatility remains compressed, and risk assets are priced for near-perfect conditions. Positioning suggests investors are already fully invested, leaving little room for incremental buying power.

My View: This is a data point markets should not ignore:

• Such low reported cash levels are usually a good selling signal (contrarian)

• With cash levels at record lows, there is very little fresh money left to chase equities.

• Any disappointment, unexpected macro data, or exogenous shock could trigger a sharp and disorderly sell-off, as positioning is stretched and crowded.

• Incoming data does not point to a booming economy. Growth signals are mixed, and the Fed remains in a “wait-and-see” mode, notably lacking the dovish tone that would normally justify such aggressive risk allocation.

In short: valuations and positioning are running far ahead of fundamentals.

ETFMandate Portfolio Positioning

ETFMandate continues to run a contrarian stance, focused on capital preservation and optionality:

• Equity exposure steadily reduced during recent months

• Cash levels increased to maintain flexibility

• Short positions added or increased in some of the most crowded trades, particularly:

  • AI-related stocks

  • The broader technology sector

  • The defense sector

  where expectations have become increasingly one-sided

• Long volatility exposure added, as volatility remains artificially suppressed and is likely to rise sharply in the event of a macro, policy, or geopolitical shock.

I am waiting for better entry points, which could arrive sooner than expected. History shows that when cash levels are depleted and positioning is stretched, corrections often come out of the blue — and tend to be faster and deeper than anticipated.

ETFMandate remains focused on asymmetric risk-reward setups, prioritizing protection and optionality over chasing late-cycle momentum.

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