From January 11-16, 2020 Bank of America conducted its monthly survey among 249 managers that manage ~$739B in AUM. The key takeaways were…
Equity Allocation:
- Bullish, but not yet Euphoric.
- BofA chief investment strategist Michael Hartnett, “We stay irrationally bullish risk assets until peak positioning and peak liquidity incite a spike in global bond yields and ‘the big short’ opportunity.”
- 32% overweight. Up from 12% underweight in August (biggest increase since August 2011).
- Highest Equity allocation in 17 months.
- Remains below the net 50% overweight level consistent with prior market tops.
Yield Curve:
- A net 51% expect the 3mo./10yr U.S. Treasury yield curve to steepen over the next twelve months.
- This is down 11% from the recent high in November 2019.
Growth and Profits:
- Global corporate profit expectations jumped 14 percentage points from December to 27% of respondents now expecting corporate profits to improve over the next year.
- Half see global growth improving over the coming year. This is the highest rate since February 2018.
Inflation:
- 14 percentage point jump in consumer price increase expectations to a net 56%.
- Highest since November 2018.
U.S. Dollar:
- A net 53% think the U.S. dollar is overvalued.
- This is the second highest recording since 2002.
- Here’s what happened the last time:
Cash levels:
- Remained at 4.2% for the third consecutive month.
- Highest level since March 2012.
Commodities:
- Allocation to commodities rose 4% to a net 10% overweight.
- Highest level since March 2012.
Top 3 tail risks:
- 29% – 2020 U.S. presidential election
- 22% – trade war with China
- 20% – bond bubble popping
