The stock market is melting up headed into 2020 as investors reduce their fears over the U.S.-China trade war and enjoy low interest rates, and some new data out proves it.
Investor cash levels in December as a percentage of their portfolios are at the lowest level since March 2013, according to the latest survey of fund managers from Bank of America. The allocation to global equities surged 10 percentage points from November to 31% overweight, the highest level in a year.
Bank of America’s latest survey of fund managers with $745 billion in assets under management was conducted on Dec. 6 to Dec. 12, when it became clear a phase one trade with China would be inked. That deal was confirmed on Dec. 13, and the broader stock market has received its next push higher as a result.
Why investors are so bullish right now is also nicely picked up in the study.
For starters, investors are bullish on global growth as trade tensions appear to be simmering down and the U.K. election is in the rearview mirror. Global growth expectations surged 22 percentage points in December from November, marking the biggest two-month jump on record. Meanwhile, recession concerns plummeted 33 percentage points to a net 68% of investors expecting a recession in the U.S. is unlikely in 2020.
Trader Ashley Lara works on the floor of the New York Stock Exchange, Friday, Dec. 13, 2019. After months of waiting, markets had a muted reaction to news Friday that the US and China had reached an initial deal on trade. (AP Photo/Richard Drew)
On the other hand, the effects of the Federal Reserve’s three interest rates this year also continue to weigh favorably on investor psyche. Global corporate profit expectations, per the survey, shot up 23 percentage points from November. The study said worries about the credit cycle remained steady from November.
“What a melt up basically means is that you may get some short moves, but the trend overall will be higher. I think you will see that going into the end of December and that sets us up well in 2020,” iQ Capital CEO Keith Bliss said on Yahoo Finance’s The First Trade.
Rally on.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi
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