Money managers are bullish about global growth and buying equities, according to Bank of America Merrill Lynch's monthly fund manager survey released Tuesday.
Global growth expectations jumped 22 percentage points to net 29% of managers polled indicating they expect global growth to improve over the next year, marking the biggest two-month jump in growth expectations on record.
The survey of 247 money managers representing a total of $745 billion in assets under management was conducted Dec. 6-12.
Inflation expectations surged 12 percentage points to net 43% of survey participants expecting higher global consumer price index in the next 12 months.
Recession concerns plummeted 33 percentage points to net 68% of respondents saying a recession is unlikely in 2020.
Meanwhile, 20% of managers surveyed think the global economy will experience above-trend growth and below-trend inflation, a seven-month high, while 65% continue to expect below-trend growth and inflation.
Allocation to global equities rose 10 percentage points on a month-over-month basis to net 31% overweight, the highest level in one year.
While the allocation to stocks rose, manager allocation to bonds continued to decline, falling 1 percentage point this month to net 48% underweight, the most underweight in more than a year.
Meanwhile, the average manager allocation to cash remained at net 18% overweight, the lowest cash allocation since November 2015.
Trade war concerns continue to be the dominant tail risk for managers, with 33% of respondents saying it's their top worry. In fact, a possible trade war has topped the charts for 20 of the past 22 surveys.
Concerns about the credit cycle remained steady this month, with net 39% of respondents thinking corporate balance sheets are overleveraged.
Global corporate profit expectations surge 23 percentage points from November, with net 14% of asset managers saying they expect profits to deteriorate over the next 12 months.
When asked what they would most like to see companies do with cash flow, 46% of those surveyed said increase capital spending, vs. 36% wanting corporates to improve their balance sheets and 15% saying they want corporates to return cash to shareholders.