(Bloomberg) — Global fund managers are ending the year with the biggest overweight in U.S. stocks since August 2013 as risk appetite outweighs inflation and tapering woes.
According to a Bank of America Corp. survey conducted Nov. 5 to 11, investors are now more constructive on global growth and earnings, and 51% expect lower inflation. Fund managers increased their allocation to U.S. equities by 13 percentage points from the previous month to a 29% overweight, the survey showed.
Clients are “convinced” inflation is transitory and expect the Federal Reserve to remain “well behind-the-curve,” BofA strategists led by Michael Hartnett wrote in a note on Tuesday.
Emerging-market and U.S. equities are seen providing the best returns next year, while most investors expect Bitcoin to remain within the $50,000 to $75,000 range in the next 12 months, according to BofA. The largest digital token currently trades at a little over $60,000.
Global equities have been rallying since the start of October, trading near a record high, as a robust earnings season and strong corporate outlooks have fueled optimism that companies can overcome surging costs and supply constraints.
Fund managers reduced their cash holdings to 4.4% from 4.7% in October as investors bought the dip in stocks, the survey showed.
BofA surveyed 345 participants with $1.1 trillion under management.
Other survey highlights include:
- Most-crowded trades in November survey were long tech stocks, long Bitcoin, long ESG, short U.S. Treasuries, short China and EM stocks, and long oil
- Bitcoin is a bubble, according to 59% of surveyed investors
- Biggest tail risks are inflation, central bank rate hikes, China
- More investors want companies to boost spending on capex
- For Fed rate hikes in 2022, 39% of investors expect two hikes, while 37% expect one, and 13% expect none
- Allocation to Eurozone stocks declined 1 percentage point versus October to net 33% overweight, allocation to EM equities rose 3 percentage points to a net 2% underweight, while exposure to U.K. stocks fell 3 percentage points to 15% underweight, the largest since January 2021
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