What’s going on here?
According to Bank of America’s latest survey, investors haven’t been this into US stocks since 2013.
What does this mean?
Last week, the bank asked a group of professional investors – who, together, are sitting on half-a-trillion dollars worth of assets – what they’re doing with their money. Roughly a fifth answered after the US election results. And in short, they said they’re feeling confident: a net (what you get when you subtract the naysayers from the yeasayers) 23% said they expect stronger global economic growth in the next year – a wide swing from the net 10% who said they predicted a weaker global economy just a month earlier. Most said they see the high-flying US stock market being the top performer next year too. So it’s no wonder that almost a third of them said they’re holding an “overweight” – or disproportionately big – amount of US shares.
Why should I care?
For you personally: Potential opportunities if you go against the grain.
US stocks have rallied to record highs, and investors seem to be holding out for more good news. But these sentiment surveys are potentially useful as “contrarian” indicators: if people are overly optimistic, that could – so the thinking goes – be a sign that the market’s due to head in the other direction. And investors themselves admit that a return of high inflation would dent their current cheerfulness.
For markets: Mighty oaks from little acorns grow.
Beneath the surface of a stock market rally, you can usually find a few tales of individual companies that are winning thanks to positive news. On Tuesday, for instance, retail investor favorite Shopify saw its US shares jump 25% after announcing a better-than-expected quarter. Entertainment company Live Nation popped 5% after its update, and industrial conglomerate Honeywell rose 5% after an activist investor offered suggestions on how it might unlock a higher share price.
