BofA: Managers more bullish but not overly optimistic

Investor sentiment is the most bullish it's been since February but far from excessively optimistic, said results of Bank of America Merrill Lynch's August Global Fund Manager Survey.

Net 46% of survey respondents believe "it's a bull market" rather than a "bear market rally," up from 40% in July. Net 79% expect higher growth, the highest since December. And a net 34% of respondents expect the global economy to get "a lot stronger."

This investor optimism is driven by profits and inflation, expectation of a COVID-19 vaccine announcement early in the first quarter of 2021, and belief that the 10-year Treasury yield will be lower than 0.5% by the end of the year.

Cash levels are down to 4.6%, but in the neutral range.

Despite this investor optimism, very few respondents (17%) expect a V-shaped recovery. Most expect the recovery to be W-shaped (37%) or U-shaped (31%).

Respondents say long U.S. technology (59%) is the most crowded trade, followed by long gold (23%).

A second COVID-19 wave tops the list of tail risks among fund managers, with 35% putting it at No.1, followed by a U.S.-China trade war (19%) and the outcome of the U.S. election (14%).

While asset allocation among fund managers "stubbornly" skewed toward U.S. growth stocks, survey results this time around show a move toward inflation-protection stocks such as European and emerging market equities, banks, and small-cap and value stocks.