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The
euphoria sent investors' cash holdings down to 4% in December -
to pre-COVID-19 levels - according to the survey of 217 fund
managers with $576 billion in assets under management.
The drop triggered a contrarian "sell signal", BofA added.
Global stock valuations are nearing the highs seen during the
dotcom bubble, with the MSCI World index trading close to 20
times forward earnings.
A whopping 60% of the investors surveyed by BofA said they
expected emerging markets to outperform in 2021 by a big margin
amid a falling dollar, vaccine rollouts and rising expectations
of a V-shaped economic recovery. Allocation to emerging market
stocks hit the highest since November 2010.
"2020 was a year utterly dominated by COVID-19 which caused the
quickest economic and financial market collapse of all time.
However, just half a year later, recovery expectations have also
surpassed prior recessions in both speed and magnitude," BofA
wrote in a note.
COVID-19 was still seen as a threat with 30% of the investors in
the survey citing it as a top tail risk, though lower than the
41% seen in November. Fears of inflation featured as the second
top tail risk.
Long U.S. tech remained the "most crowded trade" for the eighth
straight month. Short dollar and long bitcoin came second and
third.
Bitcoin has gained 170% this year as hedge funds, family offices
and even old-school insurers stormed into the cryptocurrency
this year. Some Wall Street banks also began talking up its role
in portfolios.
(Reporting by Thyagaraju Adinarayan; Editing by Karin Strohecker
and Alex Richardson)
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