Investors were bullish but not euphoric coming into the new year, according to the January fund manager survey from Bank of America Global Research.

“We stay irrationally bullish risk assets until peak positioning and peak liquidity incite a spike in global bond yields and ‘the big short’ opportunity,” Michael Hartnett, chief investment strategist, said in a statement.

The survey was conducted Jan. 9–16 among 249 panelists with $739 billion in assets under management.

Investors’ allocation to global equities in January increased one percentage point to net 32% overweight from net 12% underweight in August, the biggest uptick in equity positioning since 2011. Nevertheless, the allocation is still below the net 50% overweight level that characterized previous market tops, BofA said.

Fund managers continued to see upside for U.S. equities, expecting the S&P 500 to peak at 3,400, up from a predicted 3022 in December 2018 and the highest since BofA first posed the question in June that year.

Asked in the January survey “When do you expect equity markets to peak?” investors said the third quarter of 2020.

Fund managers’ January cash levels stayed at 4.2% for the third consecutive month, the lowest level since March 2013, leaving the fund manager cash rule in “neutral” territory.

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.

Allocation to cash fell two points in January to net 16% overweight, the lowest cash allocation since November 2015.

In January, investors increased their allocation to commodities by four points to net 10% overweight, the highest level in nearly eight years.

Fifty-three percent of panelists surveyed maintained that the U.S. dollar was overvalued, the second highest level since 2002.

Investors’ global growth expectations jumped seven percentage points in January from the December survey to net 36% of investors polled expecting global growth to improve over the next year, the highest level since February 2018.

BofA said fund managers have completely priced out recession risks since last June when polling showed them at their most bearish since the financial crisis. However, global growth expectations have not yet reached levels consistent with a euphoric “boom,” it said.

Inflation expectations in January surged 14 points from last month to net 56% of survey participants expecting higher global consumer price index in the next 12 months, the highest level since November 2018.

Nineteen percent of panelists thought the global economy would experience above-trend growth and below-trend inflation, down a point from last month, while 62% expected below-trend growth and inflation, down three points from December.

Global corporate profit expectations shot up 14 points from December, with net 27% of fund managers expecting improvement over the next 12 months, the highest level since March 2018.

Over the next 12 months, 66% of investors said they expected the U.S. 3-month/10-year yield curve to steepen, while 15% said they expected a flatter curve.

Concerns about the outcome of the November U.S. presidential election topped the list of tail risks, cited by 29% of fund managers. Twenty-two percent cited a trade war, 20% popping of the bond bubble and 14% monetary policy impotence.

Long U.S. tech and growth stocks was January’s most crowded trade, according to 50% of investors polled. Long investment-grade corporate bonds trailed, cited by 19%; short volatility, mentioned by 14%; and long U.S. Treasuries, cited by 11%.

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