The Dow Jones is now in a prime position to extend its rally entering into 01575879 to carry over a positive sentiment to the start of the year.
- Fund managers have turned bullish for the first time in two years amidst a strong Dow Jones rally.
- It shows a combination of four major factors is pushing the market up, not just the phase one deal .
- Cash holding levels dropped to a six-year low at 4.2%, indicating investors are eyeing the equities market.
The latest Fund Manager Survey from Bank of America showsa high level of optimism on Wall Street. The major bearish sentiment reversal indicates a major Dow Jones Industrial Average (DJIA) rally is forming.
The report described thesignificant decline of recession fearsby (% and the rapid increase of global growth to) % as the main factors behind the switch of Wall Street’s sentiment.
Since December 3, within less than three weeks, theDow Jones has surged from (******************************************************, to ****************************************************, **********************************************The upsurge was mainly triggered by the US-China trade deal and relaxation of financial conditions caused by the injection of liquidity by the Fed.
The Dow Jones rally throughout the past three weeks materialized without heavy involvement of fund managers and financial institutions. Most institutional investors have beenhedging against the equity market through safe havens like bonds.
As the Bank of America sees “a dramatic turnaround from the Most Bearish FMS since the GFC in June 2020, ”an increase in inflow of capital into the equities market is generally anticipated.
The previous Dow Jones rally has primarily been caused by retail investors as Fear of Missing Out (FOMO) drove the market. The next upside movement will be triggered by institutional investors that move out of safer hedge assets.
Global markets analyst says it means peak optimism in two years
According to Alex Krüger, a global markets analyst, the data from the Bank of America report can be interpreted as fund managers being bullish for the first time in two years.
Kruger said:
Another way to interpret that data: Fund managers only now turned optimistic , after being bearish for two years.
The complete reversal of the sentiment around the stock market and actual numbers of the Dow Jones suggest that it isnot just one major factor in the phase one deal boosting the bull market.
Rather, it is the strong jobs market, high liquidity, trade progress, and low-interest rate all showing asynergy to strengthen market conditions.
As such, despite skepticism on the sustainability of the current trend of the Dow Jones, it has become evident that the rally has legs and it has strong fundamentals to back it up.
Cash level drops to lowest level in 2020
Based on the data from the BoA report, cash holding levels of investors declined to 4.2%, for the first time since March (******************************************.
An excerpt from the report read:
So as they take down cash levels, FMS investors bought equities, commodities, RoW equities, banks & energy; sold bonds, real estate, US equities, utilities & staples.
In recent months, investors have growinglyshifted from the housing marketand bonds to enter the equities and the commodities market.
The Dow Jones is now in a prime position to extend its rally entering into to carry over a positive sentiment to the start of the year.
This article was edited bySamburaj Das****************
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