Record-Low Cash Allocations Spark Concerns of Stock Market Sell-Off

Investors' cash reserves have dropped to historic lows, raising warnings of potential equity declines as U.S. stocks hit record-high allocations.

Bank of America's latest survey shows global cash allocations at 3.9%, the lowest level since June 2021, triggering a contrarian sell signal for equities.
The shift reflects a surge in U.S. equity exposure, with fund managers holding a record net 36% overweight position in U.S. stocks, driven by optimism about economic growth and pro-business policies under President-elect Donald Trump.
Historically, similar cash allocation lows have preceded average global equity losses of 2.4% within a month, according to BofA's analysis of past signals since 2011.
European fund managers are leading the reduction in cash holdings, influenced by aggressive rate cuts in the Eurozone and Switzerland, while U.S. money market funds continue to grow, reaching $6.77 trillion in assets.
While optimism about U.S. market strength dominates, concerns linger over potential risks, including global trade tensions and inflation-driven Federal Reserve rate hikes.