Fund managers around the world are worried about missing out on the next leg higher in the bull market and have slashed cash holdings to buy more equities, as concerns about an economic slowdown fade, a Bank of America Merrill Lynch report showed.

A survey of 178 investors, who together oversee $574 billion, said they had reduced cash in their portfolios by 80 percentage points to 4.2 per cent, the lowest level since June 2013. Optimism about global growth surged by the most in 20 years to an 18-month high, while expectations for a steeper yield curve among managers were at the highest levels since November 2016.

“The bulls are back,” wrote BofAS chief investment strategist Michael Hartnett in the report. “Global recession concerns have vanished and the fear of missing out has prompted a wave of optimism and a jump in exposure to equities and cyclicals.”

The bullish sentiment echoes that of Unisuper’s head of equities Simon Hudson, who said last month that he expected to see “another leg up” in equity markets and that the longest bull market in history “still has a way to go.”  First State Super’s head of growth assets Robert Credaro said he expects to see the market return around 7 per cent in the medium term.

The monthly survey, which was conducted in the first week of November, showed equity allocations had increased to a one-year high with a net 21 percent who said they were overweight. Their bond holdings slipped to 47 percent underweight and about 10 per cent are overweight global real estate.

The survey also showed fund managers have increased their peak target for the US benchmark S&P 500 Index to 3,246 up from 3,166, that’s about 5 per cent higher from yesterday’s close. They have also bought value stocks, banks and increased their exposure to the Eurozone.

While the US China trade war is still considered the number one risk to investors, a so-called trade truce between the two countries could also become and extra tailwind for cyclical stocks, the report said. Some 84 percent of fund managers also said they don’t expect the Federal Reserve to raise interest rates   before the 2020 US presidential election.

Sarah Jones is the deputy editor of Investment Magazine. She previously worked for Bloomberg News in London for more than 12 years covering equity markets and global asset management. Prior to moving to the UK, she worked for Australian Associated Press in Sydney covering economics and monetary policy.
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