Equities have not peaked yet and rally may continue beyond 2019: BofA-ML

A majority of the money managers are of the view that equity markets have not yet peaked and the rally may continue beyond 2019, reveals the Global Fund Manager Survey conducted by Bank of America Merrill Lynch (BofA-ML). Three-fourths of the responded said the equities have not peaked yet, while a fifth said January marked the top, the brokerage said.

Meanwhile, the threat of a hawkish stance by central banks, including the US Federal Reserve and European Central Bank (ECB), has re-emerged as the biggest tail risk in May. Concerns over a trade war, the biggest risk in April, were seen easing. The survey found investors would rotate from equities back into bonds if the yield on the 10-year US Treasury reached 3.6 per cent. Meanwhile, cash levels dropped 10 basis point to 4.9 per cent from five per cent in April; however, they remained high compared to the 10-year average of 4.5 per cent. “This month’s survey presents good and bad news,” said Michael Hartnett, chief investment strategist. 

“Although cash levels remain high and growth optimism is at the lowest level in over two years, a majority of investors say there is room to grow in this equity bull market and don’t see signs of recession anytime soon. Fund managers think the May rally can extend in the near-term.” 

Fund managers said they had six per cent overweight allocation to commodities, the most since April 2012 when crude was at $105 a barrel.