Solely purpose to be bearish? No purpose to be bearish

The Charging Bull near Wall Street is pictured in New York.

Carlo Allegri | Reuters

Investors are so optimistic about the market that they are spending cash to compete in the latest record run, a widespread survey by Bank of America found.

The bank’s Global Fund Manager poll, one of the longest-running polls of Wall Street investors, found that the majority of investors are in favor of an economic recovery. A record share of money managers also believe that global growth is at an all-time high.

However, Bank of America noted that this high level of optimism should raise eyebrows in 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,” wrote Michael Hartnett, chief investment strategist for Bank of America, in a message to clients.

Bank of America surveyed 225 mutual fund, hedge fund and pension fund managers with $ 645 billion in assets under management. The bank has been conducting the survey since 1998.

Here are some of the key results:

  • More than 90% of investors believe the economy will be stronger in 2021 than it was last year, with the consensus that a V-shape recovery is taking place. For the first time since January 2020, chief investment officers want to increase investments instead of improving balance sheets.
  • The fund managers’ cash allocation has fallen to 3.8%, its lowest level since March 2013, just before the “Taper Tantrum” era under former Federal Reserve Chairman Ben Bernanke. The allocation to stocks and commodities is the highest since February 2011.
  • The survey shows that managers’ preference for cyclical stocks, high exposure to commodities, emerging markets, industrials and banks is high compared to the past 10 years.
  • Investors say the risks include coronavirus vaccine rollouts, inflation, crowded tech trades, long bitcoin trades, and shorting dollar trades.
  • Only 13% of respondents said stocks are in a bubble.

Stocks are hovering at all-time highs as investors look to a successful rollout of the Covid-19 vaccine, the economy reopens, and legislators put more fiscal incentives in place.

The Cboe Volatility Index, widely regarded as Wall Street’s top fear indicator, closed below 20 on Friday, marking the first significant breach of the threshold since the pandemic-triggered sell-off began in February 2020. The drop below 20 is seen by some valued at 20 Wall Street as a great “risk-on” signal.

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