Most Fund Managers Say Recession Is Over: BofA

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%.