Investing.com -- Investor sentiment has surged to its highest level since mid-2020, according to Bank of America (NYSE:BAC)'s October Global Fund Manager Survey.
The bank's note reveals a sharp rise in optimism driven by expectations of U.S. Federal Reserve rate cuts, China's economic stimulus, and a "soft landing" for the global economy.
BofA highlighted that the survey saw the "biggest jump in investor optimism since June 2020," reflected by the BofA Bull & Bear Indicator rising to 7.1.
While this increase indicates growing enthusiasm, the report noted the indicator remains below the critical "sell signal" level of 8.0, suggesting some caution persists.
The survey also reported the "biggest jump in global growth expectations since May 2020," with investors growing more confident in U.S. and Chinese recovery efforts.
In total, BofA said 76% of surveyed investors now predict a "soft landing" scenario, while only 8% foresee a "hard landing."
Additionally, respondents expect the Federal Reserve to cut rates by 160 basis points over the next year, with 85% anticipating a steeper yield curve.
Investor portfolios are also undergoing significant shifts. The report noted "the biggest jump in global equity allocation since June 2020," while bond allocations saw a "record drop," with positioning moving from 11% overweight to 15% underweight.
Cash levels are said to have fallen to 3.9% from 4.2%, which BofA says triggered an "ACWI sell signal."
Looking at the impact of China's stimulus measures, BofA identified emerging market stocks and commodities as the "biggest winners," while government bonds and Japanese equities are expected to underperform.
The bank said investors also rotated into discretionary and industrial stocks, moving out of staples and utilities.
BofA's survey further highlighted the potential influence of the U.S. election on trade policy, with one-third of investors planning to increase hedging ahead of the vote.