There’s a lot of cash on the sidelines. Nearly $8 trillion in money market funds, for example. And as a share of total US financial assets, cash is nearly 8%, the highest in decades.

That’s the “dry powder” bull case for an equity market which heads into 2026 riding a three-year win streak.

Although overall global rate cuts are set to ~halve to 80 from 160, a Fed under Donald Trump’s thumb will almost surely deliver at least two cuts and possibly more next year, which’ll mean USD cash and ultra-short Treasury paper will be less attractive — and risk assets commensurately more tempting.

As discussed in the linked article, I buy that to a point, but caveats abound, not least of which is the simple fact that if you buy stocks trading on some of the richest forward multiples in recorded history, you’re stacking the long-term deck against yourself .

It’s important to distinguish between the sideline cash story and the professional fund manager cash allocation “story,” with the scare quotes to indicate that the latter’s typically a reference to one survey, BofA’s monthly fund manager poll.

Most readers are familiar: Every month, BofA asks fund managers about their cash allocations to get a read on risk aversion / appetite, with high cash levels indicative of fear and low cash of greed (or bullishness). This month, self-reported cash levels fell to just 3.3%, a record low.

This is just one metric from one survey, but it tends to garner a lot of attention, and rightfully so I suppose: As far as indicative metrics go, BofA’s so-called “rules” and “tools” (they’re neither in a strict sense of the terms) are fairly useful with the obligatory caveat they aren’t investment advice, and neither is anything I write here.

(Ever notice how seemingly no one involved in the investment business is offering investment advice? Imagine if the medical profession was like that: If the first and last thing every nurse, doctor and surgeon said when they entered and exited a room was, “This isn’t medical advice.”)

As the figure above reminds you, when average reported cash levels in the survey fall below 4% it can be a contrarian indicator. The table below gives you a sense of how reliable that indicator would be if you traded on it. (And again, you shouldn’t trade on it because “Not investment advice!”).

There it is: The history of the lowest cash allocations and the go-forward. It doesn’t always turn out bad over the ensuing weeks, but it usually does and the average one-month return for global stocks when cash levels are <3.6% is -2%.

Note that three-month outlook’s far better, which is to say this is really only useful as a near-term red flag.

As the bank’s Michael Hartnett remarked, that table captures the entirety of sub-3.6% cash levels in the history of the survey. Such instances are exceedingly rare.