Most Bullish Fund Manager Survey Of 2020 Has This Message

Fund managers across the globe advise “sell the vaccine” in coming weeks or months as equities seem to be close to a “full bull”, according to the BofA Securities’ Global Fund Manager Survey.

The global equity markets rebounded on the back of improving macros, the U.S. election outcome and hopes surrounding a potential Covid-19 vaccine. Cash levels have declined to 4.1% in November from 4.4% in October and 4.8% in September, the survey of a total of 216 panellists with $573 billion assets under management showed. Cash level of less than 4% indicates greed and over 5% fear.

Global stocks surged after reports of a potential coronavirus vaccine sparked a rally in shares tied to an economic reopening. Countries across the world had imposed stringent stay-at-home restrictions to contain the spreading of the deadly pathogen, freezing economic activities and causing equities to tumble. While the economies gradually opened up as the pace of adding fresh infections eased a bit, the lack of a vaccine is a key overhang.

The panellists surveyed between Nov. 6 and 12 now expect a “credible vaccine” by January 2021 against their earlier forecast of February 2021. The global growth and profit optimism is also at a 20-year high, according to the survey, which BofA pegged as the most bullish in 2020.

Here are the five key takeaways from the survey…

Biggest Risk

The pandemic, which has now claimed over 1.3 million lives across the globe, has seen resurgence in many parts of the world, including hotspots like the U.S. and Europe. As many as 41% of the 216 fund managers surveyed now perceive Covid-19 to be their biggest risk, up from 34% in October and 30% in September.

The probability of a tech bubble has risen to 19% from 16% in October, while other risks include a civil unrest (15%), a credit event (12%) and a trade war between the U.S. and China (4%).

Hopes Of A Strong Rebound

The November survey showed 20-year high in growth expectations with net 91% of the fund managers believing the economy will be stronger in the next 12 months.

As compared to 60% in October, 66% of the fund managers in November said the global economy is an early-cycle phase. That’s the highest since March 2010. Also, 84% of the fund managers surveyed expect global profits to improve. These expectations are the highest since March 2002.

‘W’ Is The Word

Thirty-nine percent of the fund managers surveyed expect the global economy to witness a ‘W’ shaped recovery. That compares with 30% in the October survey. Prospects of a ‘V-shaped’ recovery, too, have risen to 23% from 19% earlier.

Where Is The Yield Curve Headed?

A record net 73% of the fund managers surveyed in November expect steeper yield curve. That, according to the survey, is higher than the 2008 Lehman bankruptcy, 2013 Fed Taper Tantrum and 2016 U.S. election.

Sectoral Allocation

Healthcare has seen a steep reduction in allocation this month, according to the survey. Emerging market, small cap, value and banking stocks, on the other hand, have seen a “big increase” in exposure.

Staples and the Eurozone, which saw an increase in allocation last month, have seen a reduction this time around. Allocation to bonds continues to decline, as was seen in October as well.

Other Key Highlights

• Most fund managers believe emerging markets as an asset class to outperform in 2021.
• Long U.S. tech stocks (65%) continue to remain the most crowded trade, well ahead of short banks (11%), long corporate bonds (9%), long gold (5%) and long bitcoin (4%).
• 24% of the participants surveyed said value stocks will outperform growth stocks. The expectations are the highest since February 2019.
• Allocation to real estate rose 11 percentage points to net 2% underweight—the highest in three months.
• 42% of the fund managers said the U.S. dollar is overvalued—the highest level since March 2020.