Investors’ allocation to US stocks hits record high amid ‘super-bullish sentiment’: BofA survey
Investors are growing increasingly optimistic as the stock market continues to rise through the end of 2024.
In Bank of America’s December global fund managers survey, 36% of respondents said they overweight US stocks, the highest level seen in the survey’s history. This major shift in US stocks came alongside a record drop in cash allocation and global risk appetite rising to a three-year high.
It is also in line with recent calls on Wall Street for American “exceptionalism” to continue in 2025. Michael Hartnett, a strategist at Bank of America, noted that excitement over Donald Trump’s second term, optimism surrounding US growth, and Fed cuts Interest rates. Interest rates led to “super bullish sentiment” in the survey.
This broad-based uptrend comes as investors grow more confident that the global economy will not enter a recession in 2025. Only 6% of survey respondents said they believe the global economy will see a “hard landing” – with higher interest rates causing the economy to contract. Global. Growth – over the next 12 months. This is the lowest percentage of participants calling for a sharp decline in six months.
Amid signs of steady inflation and resilient economic growth, 33% of investors said they expect a “no-bottom” in the global economy, as growth remains strong but inflation does not fall to the Fed’s 2% target.
“We’re kind of bouncing between soft landing expectations that I think most of us certainly had before the election to no landing expectations,” Daniel Morris, chief market strategist for asset management at BNP Paribas, told Yahoo Finance. “Inflation may not fall the way the Fed expects. And besides, you don’t see a slowdown in economic growth.”
The Bank of America survey wasn’t entirely positive. Investors’ allocations to cash fell from 4.3% in November to 3.9% in December. A move from cash to stocks could indicate that the market rally has reached an overstretched level.
A cash position of less than 4% in the Bank of America survey is usually a short-term “sell signal,” according to Hartnett. Dating back to 2011, the MSCI World Index fell on average 2.4% in the following month and 0.7% in the three months after the signal flashed.
It is worth noting that the same “sell signal” appeared in the October Bank of America survey. Since then, the MSCI, which Bank of America tracks via BlackRock’s iShares MSCI ETF (ACWI), was up more than 1% entering the trading day on Tuesday.
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