MACRO: Fund managers overwhelmingly bullish on global economy – BofA

• Investors overwhelmingly bullish on the economic outlook
• A bullish bet on tech stocks reclaimed the title of most-crowded trade in the financial markets
• Only 13% of investors believe the U.S. stock market is in a bubble

According to the latest survey from Bank of America, global fund managers are very optimistic about the economic outlook and reduced their cash holdings to lowest levels since March 2013, just before the FED caused a market tantrum by signalling intent of winding down, or tapering, the bond-buying programme launched during the 2008 crisis.

Of the 204 fund managers overseeing a total of $645 billion in assets surveyed, a record net 91% of respondents expect a stronger economy. Meanwhile, net 84% of fund managers expect global profits to improve over the next 12 months, down 3 % from January.  "The only reason to be bearish is... there is no reason to be bearish," Michael Hartnett, BofA's chief investment strategist told clients.

Very few investors consider current situation on the stock market as a bubble and the company’s so-called Bull & Bear Indicator “remains anchored at a bullish 7.7.” According to the survey, 53% of investors believe U.S. stocks are in a late-stage bull market. However, only 13% of investors believe the U.S. stock market is in a bubble, while 27% think we’re an early-stage bull market. A record net 25% of survey respondents are currently taking higher than normal risk levels, up 6 % from the previous month. COVID-19 vaccine rollout tops the list of biggest tail risks, at 28%, followed by a "tantrum" in the bond market (25%) and inflation (24%).

A bullish bet on technology stocks, has reclaimed the title of most- crowded trade in the financial markets, pushing bitcoin to the second place. Betting against the US dollar remained the third most popular trade, according to the survey. Only 5% of respondents expect bitcoin to outperform other asset classes this year, versus nearly 60% for emerging market equities.

Source: BoFA Global Fund Manager Survey

Interestingly, inflation is considered as risk and little has been said about the commodity markets, which are now performing better than the US stock market as a whole. On the other hand, such an extremely bullish investor attitude can also be a warning and a contrarian signal. Nevertheless, as BofA's head of investment said, there are currently no short-term factors to be bearish.

A similar survey from Deutsche Bank showed investors agreeing that there were many bubbles in financial markets, with an emphasis on the bitcoin and US tech companies.