(Bloomberg) — Fund managers have trimmed cash holdings to record lows and poured money into U.S. stocks, setting off a benchmark that Bank of America Corp. says could be a signal to sell global equities.
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Cash as a percentage of total assets under management fell to 3.9% in December, a move that has historically been followed by losses on the MSCI All-Country World Index, said strategist Michael Hartnett. According to the BofA survey, the allocation to US equities rose to a record high of 36% net overweight.
Analysts have been trying for months to pinpoint an end to the global stock market rally, which has been fueled by optimism about robust U.S. economic growth, dovish central banks and bets on a revival of the Chinese economy.
Since 2011, each time the BofA sell signal has been triggered, the MSCI All-Country World Index has inflicted losses of 2.4% on investors in the following month.
Investors have piled into U.S. stocks this year on expectations that President-elect Donald Trump’s America First policies would boost domestic corporate profits. Hartnett said fund managers were “positioned for a ‘US inflation boom’ next year on the prospects of pro-growth policies.”
Fund managers viewed a recovery in Chinese growth as the most optimistic prospect for 2025, while a global trade war would be the most bearish catalyst, the survey showed.
Below are some notable findings from the poll, which was conducted from December 6 to December 12 and surveyed 171 participants with $450 billion in assets:
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Cash exposure fell to a net underweight of 14% in December, a record low, compared to a 4% overweight last month, the study found
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A net 7% of respondents expect a stronger economy, compared to a net 4% who predicted weaker growth last month
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A global recession caused by a trade war is considered the biggest tail risk, followed by inflation driving Federal Reserve rate hikes
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Investors have been most overweight the US versus Eurozone stocks since June 2012
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