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BofA survey finds 'the only reason to be bearish is...there is no reason to be bearish'

Julia La Roche
·2 min read

Institutional investors aren’t finding much to be bearish about these days, according to the latest Bank of America (BofA) survey of global fund managers, an important gauge of sentiment on Wall Street.

“[The] only reason to be bearish is…there is no reason to be bearish,” BofA Securities chief investment strategist Michael Hartnett wrote of the latest survey’s takeaways.

The survey, which polled 225 investors with $645 billion in assets under management between Feb. 5 to 11, showed cash levels are down at an 8-year low, while allocations to stocks and equities are the highest since 2011. What’s more, very few see a stock market bubble presently and the firm’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.

What’s more, the fund managers are optimistic on stocks, with 61% reporting they’re net overweight global equities, the second-highest level recorded other than February 2011.

FRANKFURT, Oct. 28, 2020 -- Photo taken on Oct. 28, 2020 shows the DAX index on a mobile phone screen in front of the Bull and Bear sculptures outside the Frankfurt Stock Exchange in Frankfurt, Germany. German shares lost on Wednesday, with the benchmark DAX index down 503.06 points, or 4.17 percent, to close at 11,560.51 points. (Photo by Lu Yang/Xinhua via Getty) (Xinhua/Lu Yang via Getty Images)
The Bull and Bear sculptures outside the Frankfurt Stock Exchange in Frankfurt, Germany. (Xinhua/Lu Yang via Getty Images)

In terms of the biggest tail risks, the COVID-19 vaccine rollout remains the top risk at 28%, followed by a tantrum in the bond market at 25% and higher than expected inflation at 24%. Again, only 13% of fund managers see a bubble on Wall Street as a tail risk.

In February, the investors believed the most crowded trades include long tech at 35% and long Bitcoin at 27%. They also think short the U.S. dollar and long ESG are crowded trades at 13%, respectively.

Investors are also upbeat about the economy, with 34% expecting a V-shaped recovery, compared to only 10% nine months ago. Most investors expect a V-shape rather than a U-shape, the survey found. A net 91% expect a stronger economy in 2021, the survey's best economic outlook ever.

Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.