Investor Overconfidence Signals End of Stocks’ Strong Tailwind

Investors have been growing more confident during this year’s remarkable stock market rally, but their optimism may pave the way for a challenging second half, warns Bank of America investment strategist Michael Hartnett. The bank’s August Global Fund Manager Survey reveals that market professionals have reduced their cash allocations to a 21-month low, and they are increasingly optimistic about the economy’s ability to withstand challenges and avoid a recession. This shift in sentiment, which contradicts the previous pessimistic outlook, has played out in various ways and has the potential to impact the market going forward.