Global investors raised their allocation to equities to net 55% overweight in January, a two-year high, according to the latest Bank of America Merrill Lynch fund manager survey.
Allocation to bonds fell to a four-year low of net 67% underweight. Investors in January were the most overweight equities relative to government bonds since August 2014, Merrill said.
The balance of investors who said they were taking out protection against a near-term correction in the markets fell to net -50%, the lowest level since 2013.
Survey respondents were divided on when they expected equity markets to peak. Thirty percent said this would happen in “2019 or beyond,” the most commonly cited response.
Goldman Sachs predicts the bull market will run another three years.
In the Merrill survey, net hedge fund equity market exposure climbed nine percentage points to net 49%, the highest level since 2006.
The net share of investors who believed global corporate earnings would increase by 10% or more over the next year came in at net 15%, the highest level since 2011. Fifty-seven percent of investors said they wanted to see companies increase capital spending.
“Investors continue to favor equities,” Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, said in a statement. “By the end of Q1, we expect peak positioning to combine with peak profits and policy to create a spike in volatility.”