BofA’s Hartnett Sees Stock Rally Extending as Growth Bets Surge

(Bloomberg) — Global equities are likely to rally even higher as a jump in economic growth expectations is keeping stock bulls firmly in control, according to Bank of America Corp.’s Michael Hartnett.

The bank’s latest survey showed a net 28% of global fund managers are overweight equities, the highest in seven months. Opinions about growth showed the sharpest improvement in almost a year, Hartnett said, with only a net 16% of investors now expecting the economy to weaken.

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There are “bulls galore” as the risk of a “recessionary trade war” has ebbed, the strategist wrote in a note. He added that equity exposure isn’t at extreme levels yet, which bodes well for the rally to continue for now.

The MSCI All-Country World Index has scaled record highs as renewed enthusiasm for artificial intelligence powers technology heavyweights, while the impact from sweeping US tariffs has so far been smaller than feared. Investors are also betting the Federal Reserve will start lowering interest rates in time to avert a recession.

The US central bank kicks off a two-day policy meeting on Tuesday, and swaps markets are fully pricing in a 25-basis-point reduction. Nearly half the respondents in BofA’s survey expect the Fed to deliver four or more rate cuts in the next 12 months.

About 26% of participants said a second inflation wave represented the biggest tail risk, while 24% flagged a less independent Fed and the dollar’s debasement as concerns.

Strategists at JPMorgan Chase & Co. and Goldman Sachs Group Inc. have also warned that investors are becoming worried about the Fed’s independence as President Donald Trump amps up pressure on the central bank to lower rates, and after his moves to fire Governor Lisa Cook.

Broadly, though, forecasters remain optimistic about further equity gains into the year end, underpinned by robust corporate earnings. About half the participants in BofA’s survey said AI was already increasing productivity.

Here are other findings from the poll, which was conducted from Sept. 5 to Sept. 11 and canvassed 165 participants with $426 billion in assets:

• The average cash level remained at 3.9% for a third straight month

• A net 15% of investors are adopting lower-than-normal risk levels, an improvement from a net 19% in August

• About 39% want companies to increase capital spending, the most since December, while only 27% want a focus on balance sheets, the lowest since February 2022

• Most crowded trades: long Magnificent Seven (42%), long gold (25%), short dollar (14%), long crypto (9%)