Bank of America Hartnett: Economic growth expectations soar, bullish market trend may continue

According to the Zhitong Finance APP, Bank of America strategist Michael Hartnett stated that as market expectations for economic growth have significantly increased, bullish sentiment in the stock market remains strong, and global stock markets may rise further.

The latest survey from Bank of America shows that a net 28% of global fund managers surveyed have an overweight stance on stocks, the highest level in seven months. Hartnett pointed out that the market's view on economic growth has seen the most significant improvement in nearly a year—currently, only a net 16% of investors believe the economy will weaken.

In his report, the strategist wrote that as the risks of a "recessionary trade war" gradually fade, the market is "bullish everywhere"; he further added that current stock holdings have not reached extreme levels, providing favorable conditions for continued upward momentum in the short term.

Benefiting from renewed investment enthusiasm in the field of artificial intelligence, which has driven leading technology stocks higher, and the actual impact of widespread U.S. tariff measures being less than expected, the MSCI All-Country World Index has reached an all-time high. At the same time, investors are betting that the Federal Reserve will initiate interest rate cuts in a timely manner to avoid an economic recession.

The Federal Reserve began a two-day monetary policy meeting on Tuesday, and the swap market has fully priced in a 25 basis point rate cut expectation. Nearly half of the respondents in the Bank of America survey expect the Federal Reserve to implement four or more rate cuts in the next 12 months.

About 26% of respondents believe that the "second round of inflation" is the biggest tail risk currently; another 24% are concerned about the "diminished independence of the Federal Reserve" and the "devaluation of the dollar."

Strategists from JP Morgan and Goldman Sachs have also issued warnings: as Donald Trump intensifies pressure on the Federal Reserve to cut rates and previously took action to dismiss Federal Reserve Governor Lisa Cook, investors are increasingly worried about the erosion of the Federal Reserve's independence.

However, overall, supported by strong corporate earnings performance, forecasting agencies remain optimistic about further stock market gains before the end of the year. About half of the respondents in the Bank of America survey indicated that artificial intelligence has played a role in enhancing productivity.

This survey was conducted from September 5 to 11, covering 165 respondents (managing a total of $426 billion in assets), with other key findings as follows:

• Cash holdings have remained at 3.9% for the third consecutive month.
• A net 15% of investors are adopting a "below normal level" risk strategy, an improvement from a net 19% in August.
• About 39% of respondents hope companies will increase capital expenditures, the highest level since December last year; only 27% of respondents want companies to focus on balance sheet optimization, the lowest since February 2022.
• The most crowded trades: long on the "seven tech giants" (42%), long on gold (25%), short on the dollar (14%), long on cryptocurrencies (9%)