Bull run that has taken U.S. equities to record highs may be nearing peak

Bank of America Merrill Lynch survey suggests bull run approaching peak, while survey respondents cite a trade war as biggest risk

Aug 14, 2018 @ 10:06 am

By Bloomberg News

The bull run that has taken U.S. equities to record highs this year may be about to reach its peak, according to the latest survey of fund managers by Bank of America Merrill Lynch.

Allocations to U.S. stocks jumped 10 percentage points this month to a net 19 % overweight, the highest since January 2015, the survey said. That makes America the most popular equity region for the first time in five years, according to the bank's analysts.

"With investors telling us they are long the U.S., the Fed and cash, our view remains: peak profits, policy and returns," said Michael Hartnett, BofAML's chief investment strategist. "Rising corporate leverage concerns say bonds should outperform stocks, while a weaker profit outlook suggests defensives could outperform cyclicals."

Safe-haven appeal has combined with a strong earnings season to keep the stock market of the world's biggest economy attractive this year even as President Donald J. Trump's trade curbs pose a threat to global economic growth. Some 57% of respondents in the BofAML survey cited a trade war as the biggest tail risk.

A net 67% of recipients said the U.S. was the most favorable region for corporate profit expectations, the highest proportion in 17 years. Long FAANG and BAT remained the most-crowded trade identified by investors for the seventh straight month.

The survey was conducted between Aug. 3 and 9 among 243 investors with a total $735 billion under management.

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