Investors are sending up a big danger signal about technology stocks

Published Tue, Sep 15 20208:48 AM EDTUpdated Tue, Sep 15 202010:15 AM EDT

Professional investors are sending up a warning sign on the technology stocks that have helped power Wall Street back into a bull market. Respondents to the September Bank of America Fund Manager Survey, a closely watched barometer of how market pros view the investing landscape, flagged technology specifically as a danger sign for stocks that have seen meteoric gains off the March 23 pandemic lows. Managers also sent signals about shifting allocations and their views on a new bull market and the economy. Specifically, they say tech is the most crowded trade in the survey's history, going back to at least 2013. In all, 80% of investors see the tech sector that way, the highest in the survey since the long-dollar trade in February 2015. S & P 500 technology shares are up 25.7% year to date and 63.4% from the March bottom. The sector has been powered by the stay-at-home trade that came into play during the Covid-19 shutdowns and also has been led by hardware and equipment companies including Apple . However, fund managers now consider a "tech bubble" the second-biggest tail risk for the market, after a second wave of the coronavirus . As investors grow leery of tech, they are rotating into other sectors, particularly industrials, according to the survey. That sector, which is down 3.7% year to date, is at its highest overweight position among managers since January 2018. Managers have trimmed positions in health-care and large-cap stocks and are moving more into small caps. They have increased cash allocations and are betting against energy. Despite all the tumbles and turns for the market this year, fund managers remain largely optimistic about the economy and stocks. They see the recession that began in February to be already over, and 58% now say that a legitimate bull market has begun. A net 47% expect global corporate earnings to rise 10% or more over the next 12 months, the most to hold that view since February 2011. Still, only a net 18% of managers are overweight stocks, which BofA strategist Michael Hartnett said is "far from dangerously bullish."

External View of the Apple store on Fifth Avenue on August 19, 2020 in New York City.

VIEW press | Corbis News | Getty Images

Professional investors are sending up a warning sign on the technology stocks that have helped power Wall Street back into a bull market.

Respondents to the September Bank of America Fund Manager Survey, a closely watched barometer of how market pros view the investing landscape, flagged technology specifically as a danger sign for stocks that have seen meteoric gains off the March 23 pandemic lows. Managers also sent signals about shifting allocations and their views on a new bull market and the economy.