Investors' allocation to bonds has reached its highest level since March 2009, as per Bank of America's monthly global fund manager survey (FMS).
The survey, with responses from 225 participants managing $553 billion in assets, revealed a notable shift in investor sentiment.
“FMS investors remain cautious on macro but turn bullish on interest rates; investor playbook for 2024 is soft landing, lower rates, weaker US$, large cap tech and pharma bull continues,” analysts wrote in a report.
Cash levels have been reduced to 4.7%, with increased allocations to both bonds and stocks. Bond allocation, in particular, saw a substantial 18 percentage points month-on-month increase, reaching a net 19% overweight — the highest allocation in almost 15 years.
This shift in allocation coincides with the belief of 76% of respondents that the Fed's hiking cycle is over, and 61% expect lower bond yields.
Moreover, a significant 94% of investors anticipate that bonds, stocks, and commodities will outperform cash in the coming year.
Equity allocation has also turned net overweight for the first time since April 2022, changing from a net 4% underweight last month to a net 2% overweight in November. This shift is attributed to a stable macro outlook and a more optimistic view on rates.