Widely followed investor survey shows extreme bullishness
A widely followed investor survey is showing extreme bullishness in the stock market, in spite of ongoing concerns around an interest rate hike and artificial intelligence credit concerns. The latest global fund manager survey from Bank of America Securities showed investor sentiment is at its third most bullish level going back to 2022, and already shaping portfolios. Cash levels have tumbled to 3.5%, far below the 4.0% threshold that triggers a contrarian sell signal for the Wall Street firm — as it suggests investors are overly optimistic. Managers’ allocation to global equities have also risen to net 56% overweight. That would be the greatest since November 2021, and also the 14th straight month that investors have been overweight equities, the firm said. The recent stock market advance has been impressive in its defiance of major concerns, as a bullish consensus takes shape on Wall Street. Investors are anticipating a “no landing” scenario, meaning that unemployment remains low and the economy refuses to slow down even in the face of higher rates. And, the survey shows that investors aren’t anticipating the Federal Reserve will hike rates at all before the midterms, even as the fed funds futures market continues to price in a sizable chance of at least one quarter point raise before the November elections. Tuesday’s moves in the bond market implied investors are fearful the Fed is behind the curve, as long-dated issues reach their highest levels in almost two decades given ongoing concerns around U.S. fiscal debt and inflation. Oil prices at a three-week high amid diminishing hopes of a U.S.-Iran peace deal also added to fears of persistent pricing pressures, with West Texas Intermediate Crude futures rising above $84 a barrel. Those anxieties reached the stock market as well on Tuesday, with the major averages down for a third straight trading session.
