Investors in Bank of America’s fund manager survey last week didn’t give up their optimism for stocks.
Fund managers were net 55% overweight in equities and 77% net underweight in bonds.
“Global reopening hopes trump [Federal Reserve] hike fears in a bullish post-pandemic survey,” Bank of America strategists led by chief investment strategist Michael Hartnett wrote.
“Investors expect inflation, not growth to fall in 2022 [and] dipped into cash to up [their] allocation to commodities (to an all-time high) and equities.”
Only 7% of fund managers expect a recession this year. An all-time low of 7% are underweight stocks.
Allocations to technology stocks fell to their lowest level since 2008, with net overweight positions falling to 1% from 21% in December.
Allocations for utilities were net underweight 31%, and for staples the net underweight number was 7%.
Meanwhile, allocation to bank stocks soared 21 percentage points in January to a net overweight position of 41%, the highest since the record month of October 2017.
For pharmaceutical stocks, the net overweight number was 30%, for industrials it was 19%, and for materials and energy it was 16%. “Assets were reallocated to cyclicals on a shift to global reopening trades this month,” Hartnett said.
It will be interesting to see how fund-manager sentiment holds up for stocks if they keep falling, as they did Tuesday.
The S&P 500 slid 1.85% as Treasury bond yields leaped and oil prices surged to the highest levels in seven years.
Investors are gripped by concern about inflation and Federal Reserve rate hikes.