A survey by Bank of America shows that investors have become so bullish that it may be time to sell global equities.

Led by Michael Hartnett, strategists wrote on Tuesday that investors significantly increased their allocations to stocks in October, while reducing bond exposure, with the cash proportion in global portfolios dropping from last month's 4.2% to 3.9%, triggering a "sell signal" in global stock markets.

The cash proportion in global portfolios has dropped to 3.9%.

Hartnett and his team noted in October's survey that "investor optimism on Fed rate cuts and global soft landing saw the biggest leap since June 2020". Stock exposure nearly doubled compared to the previous month, with a 31% net increase. Bond exposure saw a record high fluctuation, experiencing a 15% net decrease.

Similar sell signals have occurred 11 times since 2011, with global stock markets averaging a 2.5% decline in the month following the sell signal and a 0.8% decline on average over three months. The team stated that "the bubble is expanding", but Bank of America's Bull & Bear Indicator remains below 8, indicating an overheated market, signaling a reverse sell-off.

Buoyed by Federal Reserve rate cuts, resilient U.S. economy, and China's fiscal and monetary stimulus measures, global stock markets continued the bull trend after a round of volatility in early September. Propelled by strong performances in the U.S. market, the MSCI Global Index hit a historic high on Monday.

The U.S. third-quarter earnings season has started off well, with major banks calming the market last week. The S&P 500 index continued its five-week gain on Monday, reaching the 46th record closing high of the year.

This optimism is reflected in respondents flocking into emerging markets, non-essential and industrial stocks, and exiting defensive stocks such as necessities and utilities. The survey shows that the biggest winners of China's economic stimulus plan are emerging market stocks and csi commodity equity index, while the biggest losers are government bonds and japan stocks.

Fund managers' long positions in bank of america futures are close to record levels.

The survey was conducted from October 4th to October 10th, with 195 participants totaling $503 billion in assets. The following are other important findings:

About one-third of investors will increase hedging before the US elections, as they strongly believe this will boost bond yields and the US dollar, while also hitting the s&p 500 index.

Record-breaking growth expectations, with the fifth largest increase ever, as 76% of investors expect a soft landing for the economy, while only 8% anticipate a hard landing.

Investors expect the Federal Reserve to cut rates by an average of 160 basis points over the next 12 months.

Hottest trades: long positions on "The Big Seven" (43%), gold (17%), and china stocks (14%).

The biggest tail risks: geopolitical conflicts (33%), accelerating inflation (26%), US economic downturn (19%), US elections (14%), and systemic credit crisis (8%).