Stocks Face Sell Signal as Cash Holdings Drop in BofA Survey

Group 1 - Investors' cash positions have dropped below a critical threshold, with average cash held by global fund managers falling to 3.7%, a level that has only occurred 20 times since 2002, triggering a sell signal for equities [1] - The S&P 500 is currently about 3% below its October peak, indicating signs of strain in stock markets amid concerns of a potential bubble in artificial intelligence stocks [2] - Investor exposure to stocks is at its highest since February, with expectations that the market will "correct further" without an interest rate reduction next month, positioning now acting as a headwind for risk assets [3] Group 2 - Financial markets are under pressure as investors reassess economic growth outlooks, with warnings from JPMorgan Chase's Vice Chairman about the need for reassessment of AI valuations, which could impact the stock market [4] - The Bank of America survey indicates that a potential AI bubble is viewed as the biggest tail risk, with 42% of respondents expecting international equities to outperform US stocks next year, reflecting a broader sentiment that US stocks may lag behind [5] - UK stocks have seen the largest three-month drop in allocations since October 2022, driven by concerns over the economic outlook and potential tax hikes and austerity measures from the Labour government [6]