- Bank of America released its latest Global Fund Manager Survey on Tuesday.
- It showed investors haven’t been this bullish in two years, and they’re rushing into tech stocks.
Bullishness is high on Wall Street these days.
Bank of America’s latest Global Fund Manager Survey, released on Tuesday, showed investors haven’t been this bullish on stocks in two years, with a particular exuberance in the Magnificent Seven tech names.
Allocations into tech stocks have hit the highest level since August 2020, BofA said, with “long Magnificent 7” the most crowded trade since the “long US dollar” move in October 2022.
Cash levels in portfolios saw a sharp drop from 4.8% to 4.2%, and for the first time since April 2022, investors no longer forecast a global recession, the survey said. Growth expectations instead have surged to the highest point in two years, and two-thirds of respondents expect a “soft landing” scenario this year.
Meanwhile, shorting China stocks was the second-most crowded trade in the survey.
Led by Nvidia and Meta, tech stocks have launched into a red-hot streak to start 2024, continuing momentum from a strong 2023. The S&P 500 has finished positive in 14 of the last 15 weeks, and it’s notched record after record in recent months.
Bank of America strategist Michael Hartnett said the bullish positioning across markets poses a contrarian headwind.
Still, stocks sold off early Tuesday as investors digested a hotter-than-expected inflation report. January CPI climbed 0.3% compared to the month prior, and it accelerated 3.1% on an annual basis.
Meanwhile, core CPI, jumped 0.4% month-over-month, the biggest spike in eight months. The data has pushed back further on markets’ expectations for imminent interest rate cuts from the Federal Reserve, as policymakers have reiterated that they are looking for concrete evidence of falling prices.
The inflation report “keeps a Fed rate cut ‘off the menu’ for now,” said Bryce Doty, senior VP at Sit Investment Associates. “The real fed fund rate is still restrictive, but that likely won’t be enough to get the Fed to lower rates until there is more certainty that inflation is fully contained. In addition, we trust in certainties such as death, taxes, and the Fed being behind the curve and, as such, don’t expect rate cuts until the second half of the year.”
In any case, most of BofA’s survey respondents anticipate inflation to continue declining. The odds of a hard landing and recession eased to 11%, while the biggest risks ahead include the US election, geopolitical uncertainty, and negative credit events most likely stemming from the commercial real estate sector.
Bank of America’s latest survey period was from February 2 to 8, 2024, and reached 249 panelists with $656 billion assets under management.