Investors show highest level of optimism since November 2021, according to popular survey

As we reach the midpoint of 2024, optimism is high on Wall Street. According to the global fund manager survey by Bank of America Securities, investors are the most bullish they have been since November 2021. Portfolio managers are not only not anticipating a recession, but they are also placing big bets on equities, especially the “Magnificent Seven.” Cash levels are at a three-year low, indicating confidence in the market. Both the S & P 500 and the Nasdaq Composite are at record highs, with the S & P 500 flirting with the 5,500 milestone, which would have been surprising at the beginning of the year.

Bank of America investment strategist Michael Hartnett noted that the sentiment in June is the most bullish since November 2021, with a broad measure of sentiment inching higher. However, some investors are concerned about a potential reversal, as the last time Wall Street was this bullish, the S & P 500 saw a significant slump the following year. Interest rate hikes by the Federal Reserve led to a correction in large-cap tech stocks in 2022. Despite the current optimism, there is a growing concern among investors about greater volatility in the second half of 2024.

The fund manager survey shows that inflation fears have eased among investors but remain the top concern. Geopolitical risks and the U.S. presidential election have become more prominent concerns. Inflation is the top risk for 32% of investors, down from 41% in May, followed by geopolitics and the U.S. presidential election. Despite these concerns, the majority of money managers are in the soft landing camp, expecting the economy to slow down without tipping into a recession. Expectations of a hard landing are at new lows, with just 5% anticipating it.

Looking ahead, 80% of investors anticipate at least two interest rate cuts over the coming year, with the first one expected in September. Investors continue to heavily invest in the Magnificent Seven, with the survey highlighting that it is the most crowded it has been since October 2020. The Magnificent Seven index has shown strong performance year to date, reflecting the confidence of investors in these stocks. Overall, while optimism is high on Wall Street at the midpoint of 2024, there are also concerns about potential risks and volatility in the market in the second half of the year. Investors will need to stay vigilant and adapt to changing market conditions to navigate through the uncertainties ahead.