In the biggest quarterly shocker out of the Harvard Endowment, which one year ago surprised Wall Street when it revealed that its biggest investment was junk bonds, yesterday we showed that the investing fund representing the world's most prestigious university had concluded there was no better investment than FAANG stocks, or specifically Apple, Microsoft, and Google, as just these three stocks represented 72% of Harvard's long equity portfolio.

So if the smartest guys in the room have decided that the best place to park their cash is a trio of the world's most expensive “growth” stocks, what is left for the rest of Wall Street? Not much, clearly, because according to the latest monthly Fund Manager Survey conducted by BofA which polls a total of 223 panelists with $643BN in AUM, for the 4th consecutive month the #1 “most crowded trade” is long FAANG+BAT (for 29% of respondents)…

… with #2 short Treasuries (17%), #3 short the USD (17%), followed by long corporate bonds and #long EM assets. The last one will be especially painful today.

So with all of Wall Street knowing that all of Wall Street is long the same trade – carrying with it the risk of a sharp, sudden unwind should conditions change – what is it that is keeping Wall Street in said trade? The answer is simple: the confidence that central banks will step in and bail traders out. Which is also why the top “tail risk” in May is a hawkish policy mistake by the Fed or ECB, replacing “trade war” as the top fear of the prior 2 months, and “reverting' to the fears from late 2017.

But while fears of central banks killing the party are back to the forefront, the risk that Trump could say a word out of place remains, as Trade War is close behind in #2 spot with new participants emerging in spot #3: “Geopolitics cause $100 Oil.“

In light of this extreme positioning – and fears – what is the best contrarian trade according to BofA? Short banks and long utilities, driven by lower bond yields.