Growth expectations are jumping while cash levels are collapsing, according to the latest Bank of America Merrill Lynch (BofAML) Fund Manager Survey, however, the highest number of managers since 1998 believe the stock market is "overvalued".
The BofAML June survey said while risk appetites were surging and Wall Street was "past peak pessimism", large numbers of managers surveyed thought markets were overvalued and polled a 'BofA Bull & Bear Indicator' of 1.1.
It also revealed just 18% of respondents expected a V-shaped recovery versus 64% who expected a U- or W-shaped bounce back, and while 37% said "it is a bull market", a 53% majority still say "it is a bear market rally".
The survey of 212 panellists with $598bn assets under management found the biggest tail risk remains a potential second wave of Covid-19.
Led by institutional investors, the survey also showed cash levels were down from 5.7% to 4.7% - the biggest drop since August 2009, according to BofAML.
Meanwhile, hedge fund net equity exposure soared to 52% from 34%, the highest level since September 2018.
The report also said fear of prolonged recession was down to net 46% in June from 93% in April.
It revealed a series of big post-pandemic structural shifts and found 68% of respondents reported supply chain reshoring, 48% cited protectionism and 43% higher taxation.
The survey's forecast for 10-year annualized equity returns was just 3.4%. It found investors want CEOs to improve balance sheets first (65%), raise capex second (23%) and buyback stock last (5%).