Investors are going “all in” on US technology stocks as they turn the most optimistic about global growth in two years, according to a survey by Bank of America Corp.

Allocation to tech is now at the highest since August 2020, the global survey of fund managers showed. Exposure to US equities more broadly has also risen, while easing macro risks prompted investors to trim cash levels by 55 basis points from January.

Previous such declines in cash levels were followed by stock market gains of about 4% in the following three months, strategist Michael Hartnett wrote in a note.

Technology companies, which generally benefit from lower interest rates, have led US stocks to a record high this year, with the Nasdaq 100 heading for a fourth straight month of gains. But the rally has left the benchmark S&P 500 in so-called overbought territory, which some market participants consider a precursor for declines.

Hartnett said in the note dated Feb. 13 that overly bullish investor positioning was increasingly becoming a contrarian headwind for risk assets.

The rally could be given more fuel on Tuesday when the US is due to publish monthly figures on consumer prices. The data are expected to show more disinflation in services following recent declines in goods prices, which will bolster the case for rate cuts by the central bank, according to Bloomberg Economics.

A majority of respondents to BofA’s survey also expect inflation to decline, while only 7% predict higher pricing pressure. About 65% of investors forecast a soft economic landing, while the probability of a hard landing faded to 11%. About 41% of participants said they expect large-cap growth stocks to drive equity markets, while 18% indicated gains would be fueled by small-cap growth stocks.

Other highlights from the survey, which was conducted between Feb. 2 and Feb. 8 and canvassed 209 participants with $568 billion in assets under management:

• A record 46% of participants said global fiscal policy is “too stimulative,” up from 37% in January.
• Most crowded trades: long Magnificent Seven (61%), short China equities (25%), long Japan equities (4%), long cash (2%) and long investment-grade corporate bonds (1%).
• Biggest tail risks: higher inflation, geopolitics, systemic credit event, economic hard landing, US election and China banking crisis.
• US commercial real estate is considered the most likely source of a systemic credit event.

This article was provided by Bloomberg News.