Stocktake: Fund managers are forgetting about Covid

“It’s over.

Covid-19 continues to dominate our lives but it’s no longer causing investors sleepless nights. Bank of America’s pithy description of its latest fund manager survey reflects the fact that for the first time since before the pandemic, Covid-19 is no longer seen as the largest risk facing global markets. Investors are more worried by higher-than-expected inflation and a bond market tantrum, with the vaccine rollout a distant third.

The other big change is in investors’ outlook on technology stocks, with March seeing the biggest drop in tech exposure in 15 years. Despite that, long technology stocks remains the most crowded trade in global markets, say investors, followed by long bitcoin.

‘Unambiguously bullish’

Otherwise, investors' mood hasn't changed much since last month. Sentiment remains "unambiguously bullish", says Bank of America. The percentage of investors expecting a stronger economy resembles last month's record-breaking number, while equity allocations remain near all-time highs.

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Contrarians will note cash levels remain very low and at levels typically associated with short-term weakness. That said, sentiment isn’t ecstatic. Cash levels actually edged up on February’s figure, while the percentage of investors taking higher-than-normal levels of risk slipped from last month’s record levels. Bank of America’s Bull & Bear Indicator remains at 7.2, shy of the 8.0 level that triggers a sell signal.

In other words, investors are excited but not euphoric – not yet anyway.