Allocation to bonds at the highest level since 2009, BofA’s survey shows

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.