Stocks may be flying high but investor sentiment remains “stubbornly low”, according to Bank of America’s (BofA) latest monthly fund manager survey.
It’s not that investors are especially bearish. Risk appetite is the highest since February, before the banking crisis. Profit expectations are the most optimistic since February 2022.
Cash allocations have fallen sharply from 6.3 per cent in October to a 19-month low of 5.1 per cent. The overall mood remains wary, however. Cash allocations may be falling but they remain “high-ish”.
Investors have piled into technology stocks in a “flight to safety” but are cautious about equities in general; allocations have fallen to five-month lows, with the vast majority of respondents still taking lower-than-normal risk levels.
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Meanwhile, bond allocations are 2.6 standard deviations above long-term norms. There’s no love for stocks, then. Such positioning, says BofA, means the “pain trade for risk assets” is “still up”.
