Bullish investors primed to drive stock rally, says BofA

Bullish investors primed to drive stock rally, says BofA
US stocks and global equities will be the biggest beneficiaries as dollars rotate from cash, suggests survey.
JUN 18, 2024
By  Bloomberg

Global investors are likely to keep pumping money into record-hitting stock markets, according to a survey by Bank of America Corp.

Answering a question about the asset class that would benefit most from a reallocation of money-market funds, 32% of respondents opted for US stocks. Another 19% said the cash would go into global equities, while a quarter of the respondents indicated they would buy government bonds.

The survey — conducted from June 7 to 13 and canvassing 206 participants with $640 billion in assets under management — showed investors remained the most bullish since November 2021, with cash levels in money-market funds at a three-year low. Cash funds currently have about $6.1 trillion in assets, according to data compiled by Bloomberg.

Long bets on the so-called Magnificent Seven technology behemoths such as Microsoft Corp. and Nvidia Corp. now stand at 69% — among the most single crowded trades in history, the survey showed.

US stocks have rallied to all-time highs, driven by the buzz around artificial intelligence as well as optimism that the prospects for easing inflation would allow the Federal Reserve to cut interest rates this year. A 15% rally in the S&P 500 this year has lifted the benchmark’s forward 12-month price-to-earnings ratio to 21, well above a long-term average of 16, according to data compiled by Bloomberg.

Still, the valuations haven’t deterred a range of Wall Street strategists, including at Citigroup Inc. and Goldman Sachs Group Inc., from turning even more bullish on the outlook for the S&P 500.

Bank of America’s poll showed 41% of fund managers expect large-cap growth stocks to continue to drive the US rally. Big tech has contributed nearly three quarters of the S&P 500’s rally this year, with Nvidia alone driving 34% of the gains, according to data compiled by Bloomberg.

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