Investors' exposure to U.S. stocks jumped to the highest level since 2013 after Donald Trump won the U.S. presidential election on optimism about strong U.S. economic growth, a Bank of America survey showed.
The survey, conducted from November 1 to November 7, surveyed fund managers with $503 billion in assets under management.
About 22% of respondents responded after the Nov. 6 election results and reported a "bullish surge," Bank of America chief strategist Michael Hartnett wrote in a note.
Of those investors, 23% expect global economic growth to strengthen next year, compared with 10% who expected weaker growth in last month’s survey. Among those respondents, the percentage of fund managers who are overweight U.S. stocks nearly tripled to a net 29%, Hartnett said.
U.S. stocks have rallied since Trump’s victory as investors bet his pro-business policies will benefit domestic assets. The S&P 500 hit a record high as investors piled into small-cap stocks, which are expected to get a boost from Trump’s protectionist stance.
Citigroup strategists said the rally could now lose steam as investors start to book profits. Meanwhile, stocks in Europe and Asia have underperformed on concerns about potential tariffs.
Fund managers surveyed by Bank of America said they expect U.S. stocks to be the best-performing asset class next year. Investors responding after the election results also said the Russell 2000 index of small-cap stocks would outperform large-cap stocks.
Small-cap stocks have seen significant inflows since the election, with the Russell 2000 soaring nearly 6% since Election Day. With a lack of international exposure, small-cap stocks will minimize the risk of Trump imposing sweeping tariffs on imported goods, so investors expect them to perform well during Trump's second presidential term.
In addition to U.S. stocks, global stocks and gold will also perform well next year, survey participants said.
Respondents are also bracing for a resurgence of inflation, now seen as the biggest tail risk.
Article forwarded from: Jinshi Data