If a pullback in US stocks is imminent, don’t say you weren’t warned. In contrarian fashion. By fund managers.

I meant to mention this earlier in the week, but I was on the road and it slipped through the cracks, which is actually fine because it’s good Friday evening material.

The December installment of BofA’s Global Fund Manager survey showed cash levels falling from 4.3% to 3.9% of AUM. As the figure below shows, that’s the lowest in 42 months.

One of BofA’s trading “rules” says cash levels below 4% are a contrarian “sell” signal. If you’re keeping track at home, there were a dozen such signals looking back to 2011, and they were followed by average global equity returns of -2.4% over the ensuing month.

Relatedly, cash allocations dropped to a net 14% underweight this month. That was the lowest ever in data back to 2001, and as Michael Hartnett pointed out, the 18ppt MoM drop from November to December was the most pronounced in half a decade.

The figure shows the spread between the net share overweight stocks and the share overweight cash. It speaks for itself.

The bottom line from the poll, released on the eve of the Fed’s hawkish cut, was straightforward: Fund managers are sitting with record-low allocations to cash and record-high allocations to US stocks, an inclination to risk-taking which Hartnett described as “driven by Trump 2.0, US growth optimism and a compliant rate-cutting Fed.”

The Fed didn’t sound so compliant on Wednesday. And we got a reminder of the risks associated with Trump 2.0 on Thursday, when he and Elon Musk threatened to shut down the US government on Christmas.

Oh, and for what it’s worth, past instances of lows in BofA’s surveyed cash allocations were coincident “with big tops in risk assets,” Hartnett remarked.