Bank of America’s proprietary Bull & Bear Indicator, which measures investor sentiment, hit 3.7 on a scale where less than 4 indicates greed and a point greater than 5 indicates fear.
The August Fund Manager Survey was the “most bullish since Feb ’20 but far from dangerously bullish,” wrote Michael Hartnett, chief investment strategist at Bank of America.
The Charlotte, N.C.-based lender surveyed 181 participants with $489 billion in assets under management between Aug. 7 through Aug. 13.
The strong market has a net 46% of respondents in the camp that stocks are in a bull market while just 35% believe it's a bear-market rally.
A net 59% thought U.S. technology stocks were the “most-crowded” trade, down from a record 74%, followed by gold at 23%.
As for what could derail the market, a net 35% of respondents said a second wave of COVID-19 infections was the biggest “tail risk,” down from 52% last month. A flare-up in U.S.-China tensions and the U.S. election rounded out the top three at 19% and 14%, respectively.
An approximately net 70% of respondents thought the Senate flipping to Democratic control was a “risk off” signal that would best be played by shorting health care stocks.
While investors were more bullish on the stock market, which on Tuesday saw both the S&P 500 and the Nasdaq Composite reach record highs, they remained skeptical of a strong economic recovery.
Seventeen percent of respondents, down from 18% in July, expect a V-shaped recovery in the U.S. economy while 37% see a W-shaped rebound and 31% see a U.
Still, only 53% of investors think the economy is in a recession, down from almost 90% earlier this year. Thirty-one percent of those surveyed say the economy is in an early cycle while a net 79% of respondents, the highest since December 2009, believe the economy will strengthen.