- The bank's Global Fund Manager Survey, one of the longest-running polls of Wall Street investors, found that a majority of investors agree an economic recovery is at play.
- A record percentage of money managers also believes that global growth is at an all-time high.
- However, Bank of America noted that this high level of optimism should raise eyebrows among contrarians looking for signs of a turning point in the market.
Investors are so optimistic about the market that they are dumping cash to take part in the latest run to record levels, a widely watched Bank of America survey showed.
The bank's Global Fund Manager Survey, one of the longest-running polls of Wall Street investors, found that a majority of investors agrees that an economic recovery is at play. A record percentage of money managers also believes that global growth is at an all-time high.
However, Bank of America noted that this high level of optimism should raise eyebrows among contrarians looking for signs of a turning point in the market.
"The only reason to be bearish is … there is no reason to be bearish," Bank of America Chief Investment Strategist Michael Hartnett wrote in a note to clients.
Bank of America surveyed 225 mutual fund, hedge fund and pension fund managers with $645 billion under management. The bank has been conducting the survey since 1998.
Here are some of the key findings:
- More than 90% of investors believe the economy will be stronger in 2021 than last year, with a consensus that a V-shape recovery is taking place. For the first time since January 2020, chief investment officers want to increase capital spending rather than improve balance sheets.
- Fund managers' allocation to cash is down to 3.8%, the lowest since March 2013, just before the "taper tantrum" era under former Federal Reserve Chairman Ben Bernanke. Allocations to stocks and commodities are the highest since February 2011.
- The survey shows managers' preference for cyclical stocks, high exposure to commodities, emerging markets, industrials and banks is at a high level relative to the past 10 years.
- Investors say risks include the coronavirus vaccine rollout, inflation, crowded trades in tech, long bitcoin trades and shorting the dollar trades.
- Only 13% of respondents said stocks are in a bubble.
Stocks are hovering around all-time highs as investors bet on a successful rollout of the Covid-19 vaccine, the economy reopening and lawmakers passing more fiscal stimulus.
The Cboe Volatility Index, widely viewed as Wall Street's best fear gauge, closed below 20 on Friday, marking the first significant breach of the threshold since the pandemic-induced sell-off began in February 2020.The dip below 20 is viewed by some on Wall Street as a big "risk-on" signal.
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