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Key Takeaways
- Hedge fund managers told Bank of America analysts in a monthly survey released Tuesday that long bets on the so-called “Magnificent Seven” tech stocks are as popular as they’ve been in years.
- Optimism around artificial intelligence (AI) has boosted the stock price of a number of companies like Nvidia and Microsoft.
- The investors also told BofA analysts that they are optimistic about interest-rate cuts and a “soft landing,” while also harboring some concerns on inflation and potential impacts of the U.S. election in November.
Long bets on the so-called “Magnificent Seven” have become increasingly popular, with 69% of hedge fund managers calling it the most crowded trade in a new Bank of America survey, the highest concentration around the stocks since over 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 Platforms (META), and Google parent Alphabet (GOOGL)—saw similar significant growth last year. However, confidence in investing in the group wavered earlier this year as their results varied, with Nvidia continuing to rise but Tesla sliding through the first quarter of 2024.
Survey Says Hedge Fund Managers Still Betting on Mag 7
Bank of America’s monthly survey of 238 hedge fund managers with over $721 billion in assets under management (AUM) released Tuesday showed that institutional investors are still confident in the group. Nearly 70% of the investors called the long Magnificent Seven bet the most crowded trade right now, up from roughly half who said it was the most crowded trade in the last two monthly surveys.
It is the highest concentration around the tech-focused stocks since over 70% said “Long U.S. Tech Stocks” was the most crowded trade in multiple surveys during 2020, before the term “Magnificent Seven” was coined.
Optimism around artificial intelligence (AI) has driven tech stocks like the Magnificent Seven higher over the last two years, along with others related to the trend like Super Micro Computer (SMCI) and Micron Technology (MU).
Investors Optimistic About ‘Soft Landing,’ Rate Cuts; Still Concerned About Inflation
BofA analysts wrote that the fund managers surveyed are at their most bullish since November 2021, despite lingering concerns about inflation and possible impacts of the presidential election later this year.
The investors BofA analysts surveyed remain more optimistic than most on the outlook for Federal Reserve interest-rate cuts, with roughly 80% of the investors predicting two, three, or more rate cuts over the next 12 months.
Recent inflation data has increased confidence that the Federal Reserve will cut interest rates at its September meeting, but Fed officials now anticipate lowering the fed funds rate only once by the end of the year.
Nearly three-quarters of respondents also told Bank of America that they no longer see a recession in the next 12 months, with 64% of the group now expecting a “soft landing.” The investors called inflation their biggest concern of the current economic climate, followed by geopolitical tensions and potential impacts of November’s presidential election.