Fund Managers Bet Big on U.S. Stocks as Cash Reserves Hit Record Lows
1min read In a recent survey conducted by Bank of America, fund managers have markedly decreased their cash holdings to record lows, while significantly boosting investments in U.S. equities. This strategic move has activated what BofA describes as a potential sell indicator for global stocks. The survey reveals that the allocation to U.S. stocks has surged to a net overweight of 36%, the highest on record.
Strategists, including Michael Hartnett, have noted that the decrease in cash allocation to 3.9% of total assets under management might precede a decline in the MSCI Global Index, as has occurred in past similar situations. Investors have been drawn to U.S. markets, fueled by expectations of strong American economic growth and favorable central bank policies.
Historically, when BofA's sell signals are triggered, investors have experienced an average loss of 2.4% in the MSCI Global Index over the following month. This latest survey suggests that optimism around U.S. economic policies, possibly driven by Trump's anticipated tax cuts and regulatory ease, is prompting managers to predict an “American inflation boom” conducive to further growth.
According to the survey, investor sentiment is "super bullish," with global risk appetite at a three-year peak, driven by optimism surrounding Trump's possible second term and the Federal Reserve's anticipated rate cuts. Concurrently, allocations to European stocks, commodities, and cash have seen reductions, hitting several-year lows.
In detail, cash holdings are at their lowest since at least 2021, while commodity allocations are at their lowest since 2017. European stock allocations, too, have reached their lowest benchmark since October 2022, highlighting a significant investor pivot towards U.S. markets.