Bank of America Merrill Lynch: Economic Growth Expectations Soar, Bull Market in Stocks May Continue

Michael Hartnett, a strategist at Bank of America, stated that as market expectations for economic growth have significantly improved, the bull market remains firmly in control, and global stock markets may further rise. The latest survey from Bank of America shows that a net 28% of global fund managers surveyed are overweight on stocks, the highest level in seven months. Hartnett pointed out that market views on economic growth have seen the most significant improvement in nearly a year - currently, only a net 16% of investors believe the economy will weaken. In his report, the strategist wrote that as the risks of a "recessionary trade war" gradually fade, the market is "bullish everywhere"; furthermore, he added that current stock holdings have not reached extreme levels yet, providing favorable conditions for the continuation of the uptrend in the short term. Benefiting from renewed investment enthusiasm in the field of artificial intelligence and the strength of leading technology stocks, as well as the actual impact of widespread US tariff measures lower than expected, the Morgan Stanley Capital International All-Country World Index has hit a historical high. At the same time, investors are betting that the Federal Reserve will start lowering interest rates in a timely manner to avoid an economic recession. The Federal Reserve began a two-day monetary policy meeting on Tuesday, and the derivatives market has fully priced in expectations of a 25 basis point rate cut. Nearly half of the respondents in the Bank of America survey expect the Federal Reserve to implement four or more rate cuts in the next 12 months. Around 26% of respondents believe that the "second round of inflation surge" is the biggest tail risk at present; another 24% of respondents are concerned about the issues of "weakening Federal Reserve independence" and "US dollar depreciation." Strategists from JPMorgan Chase and Goldman Sachs have also issued warnings: as Donald Trump increases pressure on the Federal Reserve to lower interest rates and previously took action to dismiss Federal Reserve Board member Lisa Cook, investors are increasingly worried about the erosion of the Federal Reserve's independence. However, overall, with strong corporate earnings performance support, forecasting agencies remain optimistic about further stock market gains by the end of the year. About half of the respondents in the Bank of America survey stated that artificial intelligence has played a role in enhancing production efficiency. The survey was conducted from September 5th to 11th, covering 165 respondents (with a total of $426 billion in assets under management), and other key findings are as follows: - Cash holdings rate maintained at 3.9% for the third consecutive month - A net 15% of investors are adopting "below normal level" risk strategies, slightly improved from the net 19% in August - Approximately 39% of respondents want companies to increase capital expenditures, the highest since December last year; only 27% of respondents want companies to focus on balance sheet optimization, the lowest since February 2022 - Most crowded trades ranking: long "Big Seven Tech Giants" (42%), long gold (25%), short US dollars (14%), long cryptocurrencies (9%)