Bank of America signals rising risks on Wall Street as investor cash levels fall to record lows.
BofA’s December Global Fund Manager Survey shows that global investors are holding just 3.3% of their portfolios in cash, the lowest level on record. reports Barrons.
The survey also shows that allocations to equities and commodities are at their highest levels since February 2022, reflecting the strongest optimism about economic growth in almost four and a half years.
According to Bank of America’s historical framework, such conditions have often preceded weaker stock performance.
The firm recommends buying global stocks when cash allocations rise to 5% or higher, while it recommends selling stocks when cash allocations fall below 4%. Current levels are well below that threshold, the report notes.
“Liquidity is probably as good as it gets, which has boosted stocks into 2025, with a lot of money chasing a few ideas,” Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America, said in a separate report cited by Barron’s.
Subramanian says she expects fewer interest rate cuts from global central banks in 2026, adding that government stimulus is likely to wane as the U.S. debt-to-GDP ratio reaches historically high and uncomfortable levels.
The research also shows that fund managers have their largest overweight position in equities since December last year, with technology remaining the most favored sector.
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