Financial markets are set for a “risk asset melt-up” in the first quarter of the new decade, according to Bank of America Corp. As Brexit and trade war risks recede, and with the Federal Reserve and European Central Bank still adding liquidity, the outlook for the beginning of 2020 is bullish, strategists including Michael Hartnett wrote in a note to clients.
“We continue to expect returns to be front-loaded in 2020,” the strategists said. 
Positioning is turning bullish and December’s global fund manager survey should confirm the positive sentiment, they added.
The strategists expect the S&P 500 to reach 3,333 by March 3 – a rise of 5.2% – and see the 10-year Treasury yield hitting 2.2% by February 2, an increase of 36 basis points.
Global stocks climbed to record highs after the US and China agreed to a phase-one trade deal and the UK Conservative party won a parliamentary majority, clearing the path for the country’s exit from the European Union. 
While equities in Asia were mixed last week, they climbed in Europe alongside futures on US stock indexes, as investors awaited further detail on the trade front.
“Some of these geopolitical risks seem like they are somewhat resolved, but they’re only on hiatus,” Seema Shah, chief strategist at Principal Global Investors in London, said in an interview.
While a rally should ensue in the short term, she said investors should take a defensive stance in their asset allocation.
The benchmark MSCI Asia Pacific fell 0.1%, receiving support from better-than-expected activity data from China. Later in the session, the STOXX Europe 600 index rose as much as 1.1%.
Many investors are “agnostic” about the next move for the market, Daniel Tenengauzer, head of markets strategy at BNY Mellon, wrote in a research note, citing client feedback.
“Following conference calls with investors in Asia, EMEA and the Americas as well as meeting with investors in the US and Canada, we conclude that investors are uninterested in adopting a strong bias in any direction,” he said.