Investor activity in December indicates that the bulls are back, according to the latest fund manager survey from Bank of America Global Research.

Allocation to global equities shot up by 10 percentage points month on month to 31% overweight, the highest level in a year.

Investors continued to sell bonds for equities in December as bond allocation ticked down one point to 48% underweight, the most underweight since November 2018.

Cash levels held to 4.2%, the lowest balance since March 2013, keeping the fund manager cash rule in “neutral” territory for the second month in a row.

The cash rule holds that when average cash balance rises above 4.5%, a contrarian buy signal is generated for equities. When the cash balance falls below 3.5%, a contrarian sell signal is generated.

Investors’ cash allocation remained steady at 18% overweight, below the long-term average of 21%, and the lowest allocation since November 2015.

The survey was conducted Dec. 6–12 among 247 panelists with $745 billion of assets under management in total.

Fund managers’ global growth expectations surged 22 points from the November survey to net 29% of investors expecting improvement over the coming year. This marked the biggest two-month increase in growth expectations on record, according to the report.

At the same time, panelists’ inflation expectations jumped 12 points to net 43% expecting a higher global consumer price index in the next 12 months.

Twenty percent of fund managers said they now think the global economy will experience above-trend growth and below-trend inflation, a seven-month high, while 65% continued to expect below-trend growth and inflation.

Investor concerns about the credit cycle held steady in December, with net 39% of those surveyed maintaining that corporate balance sheets were overleveraged.

Global corporate profit expectations surged 23 points from the November survey to a 20-month higher of net 14% of investors expecting profits to improve over the next 12 months.

Asked what they would most like to see companies do with cash flow, 46% of respondents said increase capital spending, 36% wanted them to improve their balance sheets and just 15% said they should return cash to shareholders.

Concerns about a trade war are still considered the biggest tail risk, cited by 33% of fund managers, down six points from November. Twenty-two percent said they were worried about the outcome of the 2020 presidential election, 19% about a bond bubble and 12% about monetary policy impotence.

Long U.S. tech and growth stocks headed the list of most-crowded trades, identified by 34% of investors. Twenty percent cited long U.S. Treasuries, 20% long investment-grade corporate bonds and 19% short volatility.

— Check out Why Impeachment ‘Means Nothing’ to the Markets: Commonwealth’s McMillan on ThinkAdvisor.