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Investors are heading toward the end of the year in a “risk-on” mood, having reduced cash allocations and lifted their overweight position on U.S. stocks to the highest since August, 2013, BofA Securities’ monthly fund manager survey showed.

Inflation remains the biggest tail risk for markets but a majority of 61 per cent believes it is transitory and expect the Federal Reserve to remain “well behind the curve” in setting its monetary policy, the U.S. investment bank added on Tuesday.

The widely watched survey was conducted between Nov. 5 and 11 among investors with a total of US$1.2-trillion of assets under management.

“Investors are not expecting the Fed to tighten aggressively (i.e. buy-in for Powell narrative on transitory inflation and modest tapering),” BofA reported, adding that investors now see on average 1.5 Fed rate hikes next year, up from 1.1 last month.

Cash allocations fell to 4.4 per cent in November from 4.7 per cent in the previous survey last month, as investors increased their overall equity overweight and trimmed their overweight in commodities while remaining deeply underweight on bonds.

As fears about price pressures abated, investors rotated out of inflation assets, to discretionary and tech from energy, industrial and banks, while reducing value exposure to the benefit of growth.

The survey highlighted easing concerns over a macro slowdown with a net of 3 per cent now saying the global economy will improve and only six out of 100 expecting a recession in the next 12 months.

It also said “Long Tech Stocks” was the most crowded trade at 37 per cent, followed by bitcoin at 21 per cent, which a 59-per-cent majority thinks is in a bubble.

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