Top Fund Managers Make Biggest Bet on U.S. Stocks Since 2013

Global fund managers are ending the year with the biggest overweight in U.S. stocks since August 2013 as risk appetite outweighs inflation and tapering woes.

According to a Bank of America Corp (NYSE:BAC). survey conducted Nov. 5 to 11, investors are now more constructive on global growth and earnings, and 51% expect lower inflation. Fund managers increased their allocation to U.S. equities by 13 percentage points from the previous month to a 29% overweight, the survey showed.

Clients are “convinced” inflation is transitory and expect the Federal Reserve to remain “well behind-the-curve,” BofA strategists led by Michael Hartnett wrote in a note on Tuesday.

Emerging-market and U.S. equities are seen providing the best returns next year, while most investors expect Bitcoin to remain within the $50,000 to $75,000 range in the next 12 months, according to BofA. The largest digital token currently trades at a little over $60,000.

Global equities have been rallying since the start of October, trading near a record high, as a robust earnings season and strong corporate outlooks have fueled optimism that companies can overcome surging costs and supply constraints.

Fund managers reduced their cash holdings to 4.4% from 4.7% in October as investors bought the dip in stocks, the survey showed.

BofA surveyed 345 participants with $1.1 trillion under management.

Other survey highlights include:

Most-crowded trades in November survey were long tech stocks, long Bitcoin, long ESG, short U.S. Treasuries, short China and EM stocks, and long oil
Bitcoin is a bubble, according to 59% of surveyed investors
Biggest tail risks are inflation, central bank rate hikes, China
More investors want companies to boost spending on capex
For Fed rate hikes in 2022, 39% of investors expect two hikes, while 37% expect one, and 13% expect none
Allocation to Eurozone stocks declined 1 percentage point versus October to net 33% overweight, allocation to EM equities rose 3 percentage points to a net 2% underweight, while exposure to U.K. stocks fell 3 percentage points to 15% underweight, the largest since January 2021