00:00 Julie
Stocks are at a record, Allie, right? So, um and it feels like there's a lot of bullishness out there. At least that's what was in evidence in Bank of America's latest fund manager survey.
00:10 Allie
Yeah, the most bullish survey that we've seen since February, we saw uh equity allocations back at seven-month highs. There's a lot of optimism around global growth, the expectation of Fed easing, those surveyed expect four rate cuts over the next 12 months, but still cash balances are now at 3.9%. So this is below the 4% threshold that Bank of America flags and it's often seen as a contrarian sell signal because investors essentially have less dry powder to buy dips. That raises concerns over crowding in the market and historically that flashes caution when sentiment runs a bit too hot. But in other words, managers are clearly all in on the risk here. At the same time, this bullish backdrop comes with some contradiction. So a record 58% of respondents now say stocks are overvalued. Long Magnificent 7 continues to be the most crowded trade at a time when we've been talking about the need for more broadening of this rally, and a second wave of inflation tops those second half of the year tail risks. In fact, 77% of those surveyed expect stagflation. That is that economic scenario where growth stagnates, unemployment rises, and inflation remains hot. So, even though fund managers are leaning in to this soft landing narrative, how Fed easing is going to offset some of those macro risks, the market does remain vulnerable especially if the economy turns. But what we saw this morning with retail sales, the consumer still seems to be holding up here, Julie.
