Cash Holdings Of Asset Managers Lowest In 13 Years, Says BofA, Flagging 'Sell' Signal Amid 'Trump 2.0 Optimism'

Global fund managers are shrinking their cash holdings and investing heavily in U.S. stocks, pushing a key indicator to a level that Bank of America believes could signal an impending sell-off in global equities.

What Happened: The Bank of America’s survey of global fund managers has been showing a “super-bullish sentiment, with record low allocation to cash, record-high allocation to U.S. stocks and three-year high global risk appetite driven by ‘Trump 2.0’ growth optimism and a compliant rate cut by Fed.”

Cash as a percentage of total assets under management dropped to 3.9% in December. The only time fund managers’ cash allocations were near the current levels was during January to March in 2002 and in February 2011.

According to the BofA survey, a 3.9% cash allocation triggers a “sell signal,” as the allocation to the U.S. equities advanced to a record high of net 36% overweight.

See Also: Fund Managers Increase Allocation To Banking And Insurance Stocks In December: Here Are The Best Performing Financial Stocks In 2024

Why It Matters: This year, investors have flocked to U.S. stocks, anticipating that the America First policies proposed by President-elect Donald Trump will enhance domestic corporate earnings.

Morgan Stanley highlighted certain headwinds to the positive developments expected by a majority of analysts and fund managers.

“Slower-than-expected deregulation and shallower tax cuts could impact the markets,” it said in a 2025 outlook.

“Investors should remain vigilant as tech valuations climb further, with an eye toward rebalancing opportunities early next year,” said Jeremy Siegel, a senior economist at WisdomTree and emeritus professor of finance at the University of Pennsylvania.

The BofA survey further notes that investors have been long ‘Magnificent Seven’ stocks, seeing crowded trades for the 21st consecutive month.

Also, the allocation to emerging market equities fell by 23% points month-on-month in December, which was the lowest exposure to this sector since September 2024, before China announced its stimulus measures.

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