Investors Juiced About U.S. Growth Prospects

Americans who invest for a living entered 2017 with high expectations, tempered with caution over what could go wrong.

The latest survey from Bank of America Merrill Lynch Fund Managers finds optimism for economic growth south of the border at a two-year high

The biggest bets among respondents are on banks, the U.S. dollar and real estate investment trusts, while some of the biggest areas of scorn are emerging market stocks, industrials and commodities. A record level of respondents indicated small-cap stocks will outperform.

However, investors also are keeping cash on hand as a buffer against what could go wrong. Investors believe the three biggest risks to be a trade war, U.S. policy error, and China problems including a currency devaluation or a real estate bubble.

Donald Trump takes office as the 45th president Friday amid expectations that his promises of lower taxes, less regulation and higher spending will spur the economy, which has seen steady though lackluster growth since the financial crisis and accompanying recession

Investors expecting the global economy to expand over the next 12 months hit a net 62%— the difference between those believing the economy will grow against those who think it will contract — while inflation expectations were at the fifth-highest on record. Similarly, the portion of investors looking for above-trend growth and inflation is at a five-and-a-half-year high.