According to the latest Bank of America global fund manager survey, cash levels sank to 4.1% from 4.4% which was now below pre-COVID levels while equity optimism was the highest level since January 2018 with equity allocations by respondents rising 19 percentage points.
Equity allocations were at 46% in November and an allocation of 50% was classed as ‘extremely bullish’ by the organisation.
There had been a rotation in exposure to small caps, emerging markets and banks while they reduced exposure to staples, cash, bonds, Europe and healthcare.
They were particularly optimistic on emerging markets which was the asset class named as most likely to be outperform in 2021 followed by the S&P 500. A net 36% of investors said they were overweight emerging markets, up 24% from the previous month.
Respondents expected a credible COVID-19 vaccine to be available in January 2021, up from February in the previous three surveys. However, the risk of a second wave remained the biggest tail risk, rising by seven percentage points from September, followed by the tech bubble.
Michael Hartnett, chief investment strategist at Bank of America, said: “The most bullish fund manager survey of 2020 on the back of the vaccine, election, macro; November’s fund manager survey shows a big drop in cash, 20-year high in GDP expectations, big jump in equity , small cap and EM exposure; reopening rotation can continue in Q4 but we say ‘sell the vaccine’ in the coming weeks or months as we think we are close to ‘full bull’”.
