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Investor sentiment is at its most ‘bullish’ since February, as fund managers raise their equity holdings for the fourth month in a row, a closely watched report on Monday showed. According to the Bank of America Global Fund Manager Survey global growth expectations improved to 4.5 points in August, the highest level since February, from 4.3 points in July. The index scale is from one to ten. It is BofA’s broadest measure of fund manager sentiment, based on cash levels, equity allocation and global growth expectations. Around 68% of investors predict an economic soft landing, 22% no landing, and just 5% are positioned for a hard landing. Cash levels remained at 3.9% while allocation to global equities rose for the fourth consecutive month to net 14% overweight versus net 4% overweight in July, the highest equity allocation since February. Equity allocation remains below the 24-year average of net 25% overweight, however, and the recent December 2024 high of net 49% overweight. Investors increased allocations to emerging markets and global stocks, and to utilities. They reduced allocations to healthcare, eurozone stocks, and real estate. In August, investors were most overweight emerging markets, eurozone, and banks versus most underweight the US dollar, real estate, and consumer discretionary. Global growth expectations pulled back slightly in August with net 41% expecting the global economy to weaken versus net 31% in July. Inflation expectations rose to a three-month high in August with net 18% of investors expecting higher global consumer price index inflation, up from net 6% in July. A trade war triggering a global recession remained the number one ’tail risk’ in August, according to 29% of investors, down from 38% in July. Other perceived risks included inflation preventing Federal rate cuts, a disorderly rise in bond yields, an AI equity bubble, and US dollar debasement. Long ’Magnificent 7’ US technology stocks was the most crowded trade once again, cited by 45% of investors, though this was the first time for this since March. Short US dollar was the 2nd most crowded trade, at 23% of investors, dropping from the number one position in July. The US is viewed as the region in which equities are the most overvalued by a record net 91% of investors, up from 87% in July, while emerging markets are viewed as the region in which equities are the most undervalued. The survey showed increased conviction that artificial intelligence is already increasing productivity, at 55% versus 42% in July, while 52% of investors said that AI stocks are not in a bubble, down slightly from 54% in July. But around 41% of investors say AI stocks are in a bubble, up from 37% in July. Turning to expectations for the next Federal Reserve chair, 20% of respondents expect Federal Reserve Governor Christopher Waller to be the nominee, up from 14% in July; 19% say Director of the National Economic Council Kevin Hassett, up from 7%; 15% say former Federal Reserve Governor Kevin Warsh, down from 17%; and 13% say Treasury Secretary Scott Bessent, down from 26%. BofA said 169 panellists with $413 billion assets under management responded to the Global FMS questions, with the August survey conducted between July 31 and August 7. Copyright 2025 Alliance News Ltd. All Rights Reserved.
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