Investors in 'full bull' mode as vaccine hopes run high: BofA survey

[November 17, 2020] LONDON (Reuters) - Investors are in "full bull" mode, deploying more money into emerging markets, small-cap stocks and the banking sector on hopes a COVID-19 vaccine will turn around these hard-hit market segments, BofA's monthly investor survey showed on Tuesday.

Bull and bear, symbols for successful and bad trading are seen in front of the German stock exchange (Deutsche Boerse), in Frankfurt, Germany, March 25, 2020. REUTERS/Ralph Orlowski

Global stocks hit a new record high on Monday as positive data for a potential COVID-19 vaccine came from Moderna, following similarly upbeat data from rival Pfizer. Investors surveyed by BofA expect a "credible vaccine" by January.

The euphoria sent investors' cash levels down to 4.1% in November, from 4.4% last month, to pre-COVID-19 levels last seen in January, according to the survey of 190 fund managers with $526 billion in assets under management.

With global economic growth and profit expectations running at a 20-year high among the investors surveyed, the "reopening rotation" into oversold business sectors is likely to continue in the fourth quarter, BofA said.

But the bank advised clients: "We say 'sell the vaccine' in coming weeks/months as we think we're close to 'full bull'."

Meanwhile, in U.S. Treasuries, 73% of the investors surveyed were expecting steeper yield curves -- rates on longer-term U.S. Treasury securities rising faster than short-term rates. Expectations were far higher than after the 2008 Lehman bankruptcy, 2013 taper tantrum and 2016 elections.

For 2021, investors named "long" emerging market assets, S&P 500 <.SPX> and oil as their favourite trades. Nearly half of the investors surveyed by BofA said they expect emerging markets to outperform in 2021.

Graphic: Global stocks - https://fingfx.thomsonreuters.com/
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(Reporting by Thyagaraju Adinarayan; editing by Sujata Rao and Ed Osmond)

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