Bank of America warns, investor cash at all time low!

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Mixed signals

According to BofA’s December Global Fund Manager Survey: Investors are holding just 3.3% of portfolios in cash, the lowest ever.

Allocations to stocks and commodities are at highest since Feb 2022, reflecting strong optimism. Historically, such low cash levels often precede weaker equity performance.

BofA advises:
Buy stocks when cash ≥ 5%
Sell stocks when cash < 4% (we’re well below that)

Savita Subramanian, BofA’s US Equity & Quant Strategy head, notes:
“Liquidity is likely as good as it gets in 2025.”

Fewer interest rate cuts expected in 2026.
Government stimulus may fade as US debt-to-GDP hits high levels. Tech remains the most favored sector, and fund managers are most overweight equities since Dec 2024.

Bottom line: Markets are richly priced, and investor optimism may be peaking.

Sincerely,

Pele23

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Lets ask Grok 3: please explain in 4 lines: Bottom line: Markets are richly priced, and investor optimism may be peaking.

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Markets are richly priced means stock valuations (like the S&P 500's forward P/E around 22-28) are significantly above historical averages, driven by high expectations for growth (e.g., AI and earnings).Investor optimism may be peaking indicates that bullish sentiment has reached elevated levels, with surveys showing record-low cash holdings and multi-year highs in confidence.This combination suggests the market is vulnerable to disappointment if earnings growth slows, policy risks (e.g., tariffs) materialize, or economic data disappoints.In short, while the bull run has been strong, caution is warranted as further gains may be limited without sustained positive catalysts.

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