BofA clients with $614b hike risk-taking to new records

Bloomberg

Bank of America Corp. (BofA) clients with $614 billion combined are in the throes of an unprecedented frenzy of risk-taking, as more Wall Street banks sound the alarm on greed across markets.
After a week which recorded the strongest-ever inflow into stocks, a record net 25% of investors surveyed by the investment bank this month are taking higher-than-normal risks. Cash levels slumped to the lowest since 2013, while optimism on cyclical risk assets rises to the highest since 2011.
All this is being fuelled by unprecedented optimism on the growth outlook, with 84% of fund managers expecting global corporate profits to improve over the next 12 months. For the first time in a year, investors say companies should focus on spending rather than improving their balance sheets.
As a JPMorgan Chase & Co. gauge of cross-asset complacency, including valuations, positioning and price momentum, hits the highest in two decades, BofA clients aren’t concerned about market exuberance. Just 13% say that US stocks are in a bubble, while 53% witness a late-stage bull market.
With a bond “tantrum” dubbed the second tail risk after the vaccine rollout, bond allocations dropped 3 percentage points to a 62% underweight — the lowest since March 2018.
Nearly a year after the Covid-19 crisis fuelled an unprecedented rout in global markets, stimulus measures and vaccination efforts are pushing investors into reflation trades of all stripes. But after a record flood of money into equity funds, BofA strategists have warned that such exuberance may precede a correction.
Cyclical rotation paused in February, with investors boosting equity exposure to tech, healthcare and consumer staples versus January and exposure to commodities and equities is at decade-highs.
Bank of America Corp. last week trimmed compensation for their chief executive officers in 2020, a year in which banks exercised restraint in compensating employees as the pandemic ravaged the economy.
Bank of America reduced CEO Brian Moynihan’s pay by 7.5% to $24.5 million. The bank’s board said it evaluated the impact of the virus “on financial performance, its clients, communities and its own employees
Pandemic compensation has sown anger and division among higher-paid employees at the bank, who’ve pointed to underwhelming payouts and special bonus policies during a bumper year for investment bankers and traders. Meanwhile, lower-paid staff got extra payments of $750.
The biggest US banks have been frugal on pay as strains on consumer divisions counter a windfall from Wall Street dealmaking and trading.