By many measures, today’s stock market is the most expensive in history. No matter, though — everybody seems to be “embracing the bubble,” including even Wall Street’s finest. In Bank of America’s last Global Fund Manager Survey, investors remained confident that a soft landing was the economy’s most likely outcome. They also put their money where their mouth is like never before — broaching one indicator that has sounded the alarm among stakeholders.

• The December survey revealed that investor allocation to US stocks hit a record high, while cash allocations dropped to their lowest levels since the survey started in 2001.
• Historically, when investors emptied their cash reserves — such as records set in Jan. 2002, Oct. 2009, and Feb. 2011 — these peaks in super-bullishness often preceded a market correction.

This time, things might be different: With over $7T in cash still sitting on the sidelines, many traders believe the record rally could continue — fueled by FOMO. However, not all of that cash is guaranteed to flow into the market. And furthermore, with the Fed dampening their rate cut expectations at yesterday’s Federal Open Market Committee (FOMC) meeting, cash could remain a valued asset. Regardless, given that interest rates and trade wars dominate investors’ concerns, it’s easier to understand their bullishness — but history suggests caution might be warranted.