The Brick up Street bull statue is pictured in Manhattan, New York.
Carlo Allegri | Reuters
A closely watched survey of extensive fund managers registered its lowest cash allocation on record this month, underscoring a bullishness on stocks as the open-mindedness market nears the end of a strong year.
The average cash allocation level of participants in Bank of America’s Global Repository Manager Survey fell to 14% underweight, according to data released by the bank on Tuesday. That is the largest underweight disposition for currency compared with stocks since at least 2001, when the survey began, the firm said.
Put naturally, the data “shows super-bullish sentiment,” investment strategist Michael Hartnett wrote to clients on Tuesday.
He cited partial rate cuts from a “compliant” Federal Reserve and expectations for growth under President-elect Donald Trump as drivers of the emergency into stocks.
For the former, traders will get a reading of the Fed’s thinking on Wednesday when the central bank delivers its fixed interest rate decision of the year in the afternoon. Fed funds futures are pricing in a more than 95% likelihood that the important bank lowers the borrowing cost at the policy gathering, according to the CME FedWatch Tool.
That stat of net 14% underweight on dough marks a significant turn from the 4% net overweight reading in November. This 18 percentage-point drop in liquidate allocation was the largest monthly decline in around half a decade, according to Bank of America data.
What’s more, the common cash level of surveyed managers fell to 3.9% from 4.3% of assets under management, hitting a new low succeeding back to June 2021.
That marked the second time in the last three months that this level knock below the key 4% mark, which Hartnett said triggers a contrarian sell signal. This stems from the construct that with a heavy concentration in stocks, there isn’t much cash left to push the market higher. Clasp cash can be considered a safe bet for investors who want to keep assets on the sidelines if there is expected volatility.
This end up as Wall Street readies for more gains for stocks into 2025 after a year that has, thus far, proper exceeded expectations. The average target of market strategists suggests the S&P 500 will climb just over 10% between Monday’s culmination and the end of 2025, according to CNBC’s exclusive survey for Pro subscribers.
However, if the incoming year shapes up to look like 2024, that could be a solid underestimation. As of midday Tuesday, the broad index is tracking to end 2024 up more than 26% at nearly 6,050. Heading into this year, the most bullish strategist on the Terrace had expected the index to finish 2024 at just 5,200.
Despite the strength this year, equities have taken a latest breather. Notably, the Dow Jones Industrial Average is on track to notch its longest daily losing streak since the 1970s.
Numerous than 170 participants responded to Bank of America’s December survey questions, which is one of the most widely reflected gauges of investors. The group includes people who hold titles including chief investment officer and portfolio administrator, among others.