If nothing can go wrong, I suppose you don’t need hedges.

I’m reminded of an insurance agent who told me I’d be wasting my money to purchase federal flood insurance on a property in rural South Carolina because “it never floods there.” (I bought flood insurance.)

As noted here first thing Wednesday morning, professional money managers now harbor an exceedingly bullish view despite concerns around the prospect of geopolitical conflict.

The figure on the left, below, underscores the point. It shows a composite measure of sentiment which rolls up self-reported growth expectations, cash levels and equity allocations as communicated by participants in BofA’s monthly fund manager poll.

The figure on the right shows you cash allocations which are now just 3.2% after a more or less uninterrupted decline from the local peak around “Liberation Day.”

So, the overall sentiment metric, at 8.1, is the near an all-time high, and cash levels specifically sit at a record low. Recall that 4% on the cash level metric is a contrarian “sell” signal.

Cash can be conceptualized as an ATM put, and fund managers aren’t sitting on a lot of it. Nor, apparently, are they interested in OTM downside, which is to say crash protection.

A net 48% of respondents to the same BofA poll said they haven’t — and I’m quoting directly from the survey here — “taken out any form of protection against a sharp fall in equity markets.”

That’s the largest share since January of 2018, a key melt-up crescendo moment at the tail-end of the low-vol bubble. The very next month, the VIX ETN complex imploded.

“Low levels of stock market hedging are irrelevant in a world of positive surprises,” BofA’s Michael Hartnett remarked on Wednesday. “But it matters greatly if surprises suddenly turn negative.”