Investors are increasingly bullish but not yet euphoric, according to Bank of America’s (BofA) latest monthly fund manager survey. Excessively bullish sentiment is a contrarian indicator, so there are grounds for concern in the latest survey. The percentage of investors expecting improving global growth in the next 12 months is the highest level in almost two years.

Global corporate profit expectations have surged, hitting their highest level since March 2018. Inflation expectations have hit their highest level since November 2018. Cash levels remain at 4.2 per cent, the lowest level in almost seven years. Global equity allocations have hit 17-month highs. Equity allocations have surged since August, resulting in the biggest jump in equity positioning since 2011.

Cash levels

However, there’s no euphoria just yet. Cash levels are low but needed to drop to 3.8 per cent to signal “unambiguous greed”. Global growth expectations are rising but short of “boom” levels. Similarly, equity allocations are rising but remain well shy of levels that have historically coincided with market tops.

Overall, BofA's Bull and Bear Indicator stands at 6.9, below the 8.0 level that would generate a sell signal. The big short opportunity will come, says BofA's Michael Hartnett, but investors should stay "irrationally bullish" on risk assets for now.