- Investor expectations of global growth jump to 19-month highs
- Global inflation are at the second highest percentage level in over 12 years
- Cash levels continue to fall to 4.8% in December from 5.0% in November and 5.8% in October
The BofA Merrill Lynch December Fund Manager Survey shows Wall Street is bullish as cash levels continue to drop.
“Fund managers have pushed pause on a risk rally, with cash balances falling sharply over the past two months,” said Michael Hartnett, chief investment strategist. “With expectations of growth, inflation and corporate profits at multi-year highs, Wall Street is sending a strong signal that it is bullish.”
Manish Kabra, European equity quantitative strategist, added that, “Despite the improved outlook on European economic growth and inflation, global investors continue to shun European stocks amid concerns of further EU disintegration or bank defaults.”
Other highlights include:
- Investor expectations of global growth jump to 19-month highs (net 57% from net 35% in November), while expectations of global inflation are at the second highest percentage level in over 12 years (net 84% from net 85% last month).
- With a net 56% of investors thinking global profits will improve in the next 12 months, fund managers are the most optimistic about corporate profit expectations in 6.5 years.
- Cash levels continue to fall to 4.8% in December from 5.0% in November and 5.8% in October.
- Allocation to banks jumps to record highs (net 31% overweight from net 25% last month); the current reading is far above its long-term average.
- Over one-third of investors surveyed name Long USD as the most crowded trade.
- Investors identify EU disintegration and a bond crash as the two most commonly cited tail risks, corroborated by light EU and bond positioning.
- On corporate investment, a record number of investors (net 74%) think companies are currently under-investing.
- 54% of investors, up from 44% last month, think the rotation to cyclical styles and inflationary sectors will continue well into 2017, supported by a strong USD and higher rates.
- Allocation to US equities improves to 2-year highs of net 15% overweight from net 4% overweight in November.
- Allocation to Japanese equities jumps to 10-month highs, from net 5% underweight in November to net 21% overweight in December; this is the biggest month-over-month jump in FMS history.
- Investors are underweight Eurozone equities for the first time in 5 months, at net 1% underweight in December from net 4% overweight last month.