Tech Stocks Are No Longer the Most Crowded Trade

Bitcoin’s popularity has risen to a new level in the eyes of fund managers.

The allure of the digital coin has pushed long bets on technology stocks to the second most popular trade in a survey of fund managers by Bank of America Corp. this month. Managers ranked shorting the U.S. dollar as the third most popular position, the bank’s investment strategists said in a research report dated January 19.

Bitcoin prices have skyrocketed in 2021, attracting investors amid rising concern that the digital currency has entered bubble territory. Research Affiliates warned last week that bitcoin has morphed into a vehicle for speculation from the digital cash system it was meant to establish, with the firm’s vice president Alex Pickard cautioning in a blog that the “magic internet money” islikely manipulated.

January marks the first time since October 2019 that going long tech stocks fell from the top trade in Bank of America’s monthly probe of fund managers, the bank’s investment strategists said in the report. Some investors have been expressing concern overstretched valuationsin the technology sector, which has helped propel the U.S. stock market to record levels this year as the Covid-19 pandemic persists.

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Within equities, fund managers are particularly bullish on emerging market stocks, according to Bank of America. About two-thirds of surveyed investors predicted that emerging markets will be the top performer in 2021.

Investors also anticipated that policy under President Joe Biden, who was inaugurated Wednesday, will focus on health care, infrastructure and inequality. Fund managers said they expect to see higher taxation, inflation, and Modern Monetary Theory — onceviewed as a fringeeconomic doctrine — as the top three solutions for U.S. indebtedness.

As for tail risks, Bank of America found that investors worry most about the rollout of Covid-19 vaccines. A “tantrum” in the bond market was their second biggest concern, followed bya bubble on Wall Street, according to the report.