Investors all in on stocks: Mutual fund cash levels lowest on record, according to Bank of America

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Mutual funds have been reducing their cash pile in October, but that could limit stock market upside going forward.

Someone apparently forgot to tell mutual fund managers that they are supposed to be worried right now. Professional fund managers have been increasing their bets on stocks since the fourth quarter got underway earlier this month, according to Bank of America. Equity and quantitative strategist Savita Subramanian said in a note to clients that mutual funds have been reducing their cash pile in October.

That shift is notable ahead of the election and suggests that some fund managers are unconcerned about short-term volatility as votes roll in. However, the dwindling cash reserve could also mean there is limited fuel to power a big near-term rally. "Overall, sentiment indicators are turning increasingly bullish, suggesting potentially limited upside at the index level," Subramanian said. "We recommend staying selective – it's a stock picker's market.

 

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