Fund Managers Believe This Is a Whole New Cycle

The “bear market rally” has turned into a regular bull market, according to Bank of America’s monthly investor survey.

Jeremy Suyker/Bloomberg

Jeremy Suyker/Bloomberg

Fund managers think the worst is behind them.

The latest investor survey by BofA Securities found that fund managers globally were at their most bullish since February, when coronavirus fears were just starting to seep into the markets.

While fund managers last month largely believed that stocks were in a “bear market rally,” this is no longer the case. On a net basis, 46 percent of investors polled in August believe they’re now in a regular bull market.

Growth expectations were also at their highest levels since December 2009, with a 79 percent of respondents expecting to see the economy get stronger. In addition, a net 57 percent predicted that global profits would improve.

Still, Bank of America strategists believe that fund managers are not “dangerously bullish,” with cash levels reported in this month’s survey falling into the bank’s “neutral” range. Polled investors also reported muted expectations for the economic recovery, with just 17 percent expecting a “V-shape,” or rapid rebound. Instead, 37 percent were projecting a “W-shape” while 31 percent expected to see a “U-shape” recovery.


While the spread of coronavirus remained the top tail risk for surveyed fund managers, respondents told BofA that they expected to see a Covid-19 vaccine announcement by early next year. Other highly-cited tail risks included a trade war between the U.S. and China and the upcoming U.S. election.

Meanwhile, bets on U.S. tech stocks were once again cited as the most crowded trade, followed by long positions in gold. A net 31 percent of surveyed fund managers said that gold was overvalued — a sharp spike from 0 percent last month.

[II Deep Dive: Record Percentage of Fund Managers Call U.S. Tech Stocks the ‘Most Crowded’ Trade]

Tech companies, however, remained favorites of the surveyed managers despite the crowding, with BofA strategists reporting that asset allocation remained “stubbornly skewed toward U.S. growth stocks.” Still, they observed “green shoots” for small-cap and value stocks, along with other “inflation assets.”

More than 200 investors managing a combined $518 billion participated in the BofA survey, which took place between August 7 and August 13.