The Charging Bull near Wall Street is pictured in New York.
Carlo Allegri | Reuters
A widely watched Bank of America survey shows high confidence in the economic and market outlook with investors dumping cash to take part.
But the firm says the shift in sentiment should raise eyebrows of contrarians looking for signs of extreme optimism to mark a market turning point.
“The only reason to be bearish is … there is no reason to be bearish,” Bank of America chief investment strategist Michael Hartnett told clients.
A majority of investors finally agree the V-shaped recovery is at play, according to the Bank of America Global Fund Manager Survey, one of the longest-running and widely followed polls of Wall Street investors. Plus, a record percentage of money managers believe that global growth is at an all-time high.
Bank of America surveyed 225 mutual fund, hedge fund and pension fund managers with $645 billion under management. The survey has been around since 1998.
Here are some of the key findings:
- More than 90% of investors believe the economy will be stronger in 2021 with a consensus that it’s a V-shape recovery. 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 a preference towards cyclical stocks, high exposure to commodities, emerging markets, industrials and banks relative to the past 10 years.
- Investors say potential risks include the 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, economic reopening and expectations for more fiscal stimulus.
Plus, the Cboe Volatility Index, widely viewed as Wall Street’s best fear gauge, broke below 20 on Friday, marking the first significant breach of the threshold since the pandemic-induced sell-off began in February 2020.The crack of the 20 level is viewed by some on Wall Street as a big “risk-on” signal.
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