Investors began 2013 the most bullish in two years, buying global banks and European stocks, and holding the lowest level of protection against losses since before the collapse of Lehman Brothers Holdings Inc. in 2008, a Bank of America Corp. survey showed.
A net 51 percent of global fund managers, who together oversee about $586 billion, said they were overweight equities in January, four times the level at the start of 2012 and the most since February 2011. Risk appetite surged to the highest since January 2004, according to the survey.
“Global investor bullishness has massively surged in January,” John Bilton, European investment strategist at Bank of America’s Merrill Lynch unit, said at a press conference in London. “Surging global growth expectations have had an impact on asset-allocation views and cash levels are markedly down.”
The MSCI World Index has climbed 3.1 percent since the start of the year, reaching a 20-month high on Jan. 11, as U.S. lawmakers agreed on a compromise budget, avoiding tax increases and spending cuts that had threatened to push the world’s largest economy into a recession.
Alcoa Inc. kicked off the U.S. quarterly earnings season with revenue that exceeded analysts’ estimates. Almost 80 percent of the 30 Standard & Poor’s 500 Index companies to have reported quarterly earnings so far have beaten forecasts, according to data compiled by Bloomberg.
“Investors are growing increasingly confident about the growth outlook,” wrote Michael Hartnett, BofA’s chief global equity strategist in the report. We have also seen the “first overweight of global banks since February 2007. That is perhaps the boldest message this month.”
A net 3 percent of respondents said they were overweight lenders in January, meaning that investors hold more banks than are represented in benchmark indexes. They also increased their holdings in technology companies and industrials while reducing their investments in so-called defensive industries such as utilities and drugmakers.
Holdings in euro-area equities surged in January, with 15 percent now overweight, the biggest allocation since January 2008. Some 7 percent were overweight in December. The percentage of investors taking out protection against declining equity markets for the next three months also fell in January to the lowest level since at least February 2008.
Optimism in Japanese stocks increased with money mangers overweight the country for the first time since July 2011. By contrast, allocations to the U.S. stock market continued to slide, with a net 3 percent of respondents owning less than global benchmarks. That’s the first underweight in 18 months.
“In our view, investors are counting on emerging markets, Europe and Japan to outperform the U.S. equities should risk assets continue to rally in the first quarter,” Hartnett wrote. “Clearly for risk assets to remain bid, growth and earnings data will need to accelerate before the second quarter.”
The global survey, which included 190 respondents, was conducted from Jan. 4 to Jan. 10.