Shares could soar in the first quarter of 2020 according to analysts at Bank of America who predict a ‘risk asset melt-up’.

The bank’s measure of investor sentiment hit an 18-month high last week marking an ‘outright bullish’ reading and suggesting clear skies for global markets.

With the US Federal Reserve and the European Central Bank still adding liquidity to money markets, helping to keep interest rates low, and tensions between the US and China having eased after the ‘phase one’ trade deal, its analysts believe the S&P 500 index could hit 3,333 points by the beginning of March compared with a closing level of 3,169 last week, equal to a 5% gain.

UK stocks are also forecast to see further sharp gains following the Conservative landslide in last week’s election, which paves the way for higher public spending and a clear strategy on Brexit, while emerging markets have seen continued inflows of funds.

The bank also highlights the fact that expectations for global growth and profits are bullish and that investors, having taken $182bn out of equities globally this year, are now at risk of having insufficient exposure to stocks if prices move higher.

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