Bull and bear markets Photo: Dominic8/Shutterstock

It’s a bull market, according to 58% of participants in the Bank of America Global Research September fund manager survey, up from 46% last month and just 25% in May.

The survey was conducted Sept. 3 to Sept. 10 among 224 fund managers with $646 billion in assets under management.

For the first time since the February survey, more respondents said the global economy was in an early-cycle phase rather than in recession: 49% vs. 37%.

Net 84% of investors said they expected global growth over the next 12 months, up five percentage points from the August survey and the highest level since September 2003. Forty percent said it would get “a lot stronger,” the highest number ever, according to BofA.

Three in five participants predicted that the recovery would take either a U or a W shape, while just one in five maintained that it would be V-shaped.

Net 37% of fund managers, nearly triple the April figure, said they wanted chief executives to increase their capital expenditures, while 51% still insisted that corporate honchos spend cash on improving their balance sheets, down six points from August and down 27 points from the April peak.

Even so, BofA said, this shows that investors doubt the sustainability of the upturn. It said this led to a rise in their cash levels to 4.8% in September from 4.6% the previous month.

As to what would trigger higher interest rates, 41% of respondents said a vaccine for COVID-19 was necessary, while 37% cited inflation. A majority of investors expected a credible vaccine to be announced by Jan. 30.

Equity allocations rose six points month over month to 18% overweight — nowhere near dangerously bullish, BofA said.

Technology and pharma each experienced 10-point reduction in the net overweights, but remained the most-favored sectors. Fund managers rotated into small caps, as just 14% thought that large-cap stocks would outperform, the lowest outlook on large caps in more than two years.

Although the Eurozone allocation dropped 11 points to 22% overweight, it remained the region most favored by investors. The allocation to U.S. equities increase two points to net 18% overweight.

In September, the most-crowded trade was long U.S. tech, an all-time consensus high of 80%. Long gold trailed at 7%.

Twenty-two percent of investors cited a tech bubble has the biggest tail risk, surpassed only by a second wave of the coronavirus, cited by 30%. Other tail risks: the November U.S. elections, 18%; a U.S.-China trade war, 12%; and a sovereign or corporate credit event, 9%.