Stocks have gained investors' confidence to the point of having a record low allocation to the safety of cash.

• A survey conducted by a Bank of America fund manager revealed the lowest cash allocation since at least 2001.
• Michael Hartnett, the firm's investment strategist, wrote to clients that the data indicates a very optimistic outlook.

This month, a closely monitored survey of international fund managers recorded its lowest cash allocation ever, indicating a growing optimism towards stocks as the equity market prepares to conclude a robust year.

According to data released by Bank of America on Tuesday, the average cash allocation level of participants in their Global Fund Manager Survey fell to 14% underweight for currency, which is the largest underweight position compared to stocks since at least 2001.

Michael Hartnett, an Investment Strategist, wrote to clients on Tuesday that the data indicates a very optimistic outlook.

The rush into stocks was driven by the interest rate cuts from a "compliant" Federal Reserve and expectations for growth under President-elect Donald Trump.

The Fed will reveal its final interest rate decision of the year on Wednesday, with a more than 95% chance of lowering borrowing costs, as indicated by Fed funds futures.

The 14% net underweight on cash marks a significant turn from the 4% net overweight reading in November, with a 18 percentage point drop in cash allocation being the largest monthly decline in around half of a decade, according to Bank of America data.

The average cash level of surveyed managers decreased from 4.3% to 3.9% of assets under management, reaching a new low since June 2021.

The second time in three months, the stock market level fell below the key 4% mark, triggering a contrarian sell signal, according to Hartnett. This is because the market has a heavy concentration in stocks, leaving little cash to push it higher. Investors may consider holding cash as a safe bet if there is expected volatility.

Wall Street anticipates further stock gains into 2025, with market strategists predicting an average target of a 10% increase between Monday's close and the end of the year, as per CNBC's exclusive survey for Pro subscribers.

If the upcoming year turns out to be 2024, it could be a significant underestimation. As of midday Tuesday, the broad index is projected to end the year with a gain of more than 26% at nearly 6,050. Prior to the start of the year, the most optimistic strategist on Wall Street had predicted the index would finish 2024 at only 5,200.

Although the stock market has been strong this year, it has recently experienced a pause. Notably, the Dow Jones Industrial Average is on track to record its longest daily losing streak since the 1970s.

Over 170 individuals participated in Bank of America's December survey, which is a widely followed indicator of investor sentiment. The group comprises individuals with titles such as chief investment officer and portfolio manager, among others.