Investors are at their most bullish since February but are still predicting other forms of recovery over the V-shape, according to the latest global fund manager survey from Bank of America (BoA).
A net 46% of investors surveyed now say "it's a bull market" as opposed to a "bear market rally" (35%), while the BoA Bull & Bear Indicator has risen to 3.7, which is still "far from excess bullish".
Despite the turn in sentiment, few investors anticipate a V-shape recovery (17%), with the W-shape (37%) and U-shape (31%) far ahead, and although conviction in early-cycle business cycle is still rising (31%), the majority (53%) still believe in recession.
Few investors anticipate a V-shape recovery (17%), with the W-shape (37%) and U-shape (31%) far ahead, and although conviction in early-cycle business cycle is still rising (31%), the majority (53%) still believe in recession."
Investors still want companies to improve their balance sheets and reduce debt (57%) rather than expand capex (30%) and cash levels have dropped to 4.6% but remain within the neutral range, avoiding either a greed or fear reading,
Belief in gold has taken a knock as net 31% of investors now believe the commodity is overvalued, up from 0% last month and overall, they believe assets from stocks to bonds to gold are their most overvalued since 2008.
The most crowded trade is again ‘long US tech & growth' with 59% of surveyed investors pointing to it, while long gold (23%) and long corporate bonds (8%) round out the podium, and a second wave of Covid-19 dominates as the top ‘tail risk' for investors (35%), followed by US-China trade war (19%), US election (14%) and "credit event" (13%).
Asset allocation remains "stubbornly" skewed towards healthcare, US, tech, cash and short energy compared to its long term history but net 43% of investors said climate change is the ESG theme that will "outperform most" over the coming 12 months.
Global growth expectations have risen a further seven percentage points to net 79%, its highest level since December 2009, while inflation expectations grew 15 percentage points to net 52% of investors expecting a higher global CPI.
Allocation to real estate has reversed its net underweight streak, rising to net 1% overweight for the first time in four consecutive months, while allocation to commodities remained at its highest level since July 2011 at net 12% overweight.
Eurozone equities has taken the crown as the top region overweight (33%), while allocation to US, UK and Japanese equities all fell by 5 percentage points or more and emerging market equities increased 11 percentage points to net 26% overweight.
Passive investing has slipped slightly, with 22% of investor assets under management allocated to ETFs, a fall of one percentage point from July, and fewer investors intend to increase that exposure, down seven percentage points to 10%, its lowest level since July 2019.