Good morning, investors. Nvidia reports earnings after the bell today and, just like a quarter ago, it will either determine the next leg of the bull market or decimate the global economy as we know it.

At least that’s what you would assume from reading the chatter on X.

Today we’re reading the tea leaves in the exuberance.

Fund managers just made their biggest one-month rush into stocks on record.

BofA's May Global Fund Manager Survey is flashing three contrarian sell signals at once with equity allocations at net 50% overweight, cash at 3.9% and the Bull & Bear Indicator at 7.8.

The positioning is overtly bullish both big-picture and on a more granular level.

Investors, for instance, are the most overweight cyclicals versus defensives since January 2018.

They are also the most overweight technology since February 2024, and hold the fourth-highest commodity overweight ever recorded.

Bond underweights hit net 44%, the lowest level since June 2022, and just 4% of managers still expect a hard landing.

Roughly 73% now see "long global semiconductors" the single most crowded trade in the market, up from 24% in April.

Profit expectations flipped from net 14% expecting deterioration to net 17% expecting improvement, the sixth-largest monthly swing in the survey's history. Much of that can be chalked up to optimism on earnings.

Meanwhile, inflation continues to drive concerns, with 40% of managers flagging a second wave of inflation as the biggest tail risk.

That’s up from 26% in April.

The last 24 times fund managers reported cash falling under 4%, global stocks logged a median 1% loss over the next four weeks, with the worst draw at 29% and the best gain just 4%.

At the same time, bond allocations have declined to the lowest levels in four years.

Taken together, investors right now are positioned for:

None of this necessarily screams “sell” on the surface, but according to Bank of America’s survey track record, the sell signal is indeed flashing right now.

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📈 The 30-year Treasury yield hit the highest level in 19 years. The 10-year Treasury yield meanwhile rose to 4.687%, the highest since January 2025, with the bond market sending a warning sign. (CNBC)

🚀 Home Depot beat earnings estimates and reiterated its full-year outlook. Revenue rose 4.8% to $41.77 billion and adjusted EPS hit $3.43, with homeowners continuing to invest in smaller DIY projects. (Quartz)

🏘 Mortgage rates hit the highest level since last July. The average 30-year fixed loan rate rose 7 basis points to 6.75% on Tuesday. Still, sales of pending homes rose in April compared to the month prior. (CNBC)

I sat down with Kevin Gordon, head of macro research at Charles Schwab, to discuss the top-heavy stock market, the risks of rising profit margins, how the labor market could turn next, and positioning for the rest of the year.

Tune in on Spotify, Apple Podcasts, or YouTube.

🗓 May 20, 1862: President Abraham Lincoln signed the Homestead Act, granting 160 acres of public land to any settler willing to farm it. This led to the transfer of more than 270 million acres into private hands.

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