BofA: Investors bullish on election outcome, vaccine hopes

The election, emergence of a COVID-19 vaccine and macroeconomic factors have made investors the most bullish they've been all year, according to Bank of America's November Fund Manager Survey.

According to survey results, fund manager optimism over global growth is at a 20-year high, with net 91% of respondents believing the economy will be stronger in the next 12 months. Meanwhile, net 84% of investors expect global profits to improve, the highest since March 2002.

Most investment managers (66%) are also saying the global economy is in an early cycle phase as opposed to recession, the highest since March 2010.

Cash levels among surveyed money managers drop to 4.1% from 4.4%, putting it now below the pre-coronavirus level (it was 4.2% in January).

A record 73% of investors expect a steeper yield curve. When asked what path they expect the global economic recovery will take, 39% of respondents said they believe in a W-shaped recovery, while 24% expect recovery to be U-shaped, and 23% to be V-shaped.

Allocation to equities is net overweight 46%, the highest since January 2018 and close to extreme bullish. Meanwhile, allocation to cash is net 7%, the lowest since April 2015.

When asked for their three favorite trades for 2021, long emerging markets topped the list, followed by long S&P 500 and long oil. Fund managers still regard long tech as the most "crowded trade" in November.

While COVID-19 remains the No.1 tail risk for investors, they continue to pull forward their timing of a "credible vaccine," which is now expected in January 2021 (up from February). A tech bubble and civil unrest round out the top three tail risks this month.

In terms of asset allocation shifts from October, respondents reported a big increase in exposure to small-caps, emerging markets, stocks, value and banks, while revealing a big reduction in exposure to staples, cash, bonds, Europe and health care.