Wall Street Bull statue photographed in Manhattan, New York.
Carlo Allegri | Reuters
Cash allocations hit a record low this month, a closely watched survey of global fund managers showed, underscoring bullish sentiment toward stocks as they come to the end of a strong year.
Data released by Bank of America on Tuesday showed that the average cash allocation level of participants in the bank’s global fund manager survey dropped to 14% underweight. The firm said it was the largest underweight position in currencies relative to equities since at least 2001, when the survey began.
In short: The data “suggests super bullish sentiment,” investment strategist Michael Hartnett wrote in a note to clients on Tuesday.
He cited a “compliant” Federal Reserve rate cut and expectations for economic growth under President-elect Trump as drivers of the stock market influx.
Regarding the former, traders will find out what the Fed is thinking when it releases its final interest rate decision for the year on Wednesday afternoon. Fed funds futures are priced over 95% probability The central bank lowered borrowing costs at the policy meeting, according to CME Group’s FedWatch tool.
The 14% net drawdown in cash marked a significant shift from November’s 4% net drawdown. Bank of America data showed cash allocations fell 18 percentage points, the largest monthly decline in nearly five years.
In addition, the average cash level of the managers surveyed fell from 4.3% of assets under management to 3.9%, hitting a new low since June 2021.
This is the second time in the past three months that the level has fallen below the key 4% mark, which Hartnett said triggered a contrarian sell signal. That’s because, with stocks highly concentrated, there isn’t a lot of cash to push the market higher. For investors who want to keep their assets on the sidelines in anticipation of volatility, holding cash can be considered a safe option.
It comes as Wall Street braces for further gains in 2025, after a year that far exceeded expectations. The average target among market strategists suggests S&P 500 Index According to CNBC, this number will rise by more than 10% from Monday’s close to the end of 2025 exclusive investigation For Pro subscribers.
However, if the upcoming year looks like 2024, it could be one Seriously underestimated. As of noon on Tuesday, the composite index was expected to rise more than 26% to nearly 6,050 points by the end of 2024. Going into this year, Wall Street’s most optimistic strategists had expected the index to end 2024 at just 5,200 points.
Despite its strong performance this year, stocks have taken a breather recently. Notably, the Dow Jones Industrial Average is poised to break out Longest one-day losing streak Since the 1970s.
More than 170 participants answered questions in Bank of America’s December survey, which is one of the most widely followed metrics among investors. This group includes people with titles such as chief investment officer and portfolio manager.
