Investors are very bullish in August, with cash levels plummeting and global equity allocations surging, according to the latest Bank of America Global Fund Manager survey.
The composite sentiment index, which tracks fund managers’ cash levels, equity allocation and global growth expectations, is the third-highest reading since 2022.
Cash levels have dropped to an “uber-low” 3.5% from 3.6% the month prior, the lowest since February and the sixth-lowest since 1998 when the survey started.
Meanwhile, global equity allocations are up to a net 56 overweight, the highest level since November 2021, meaning investors have been net overweight equities for 14 consecutive months.
They also expect resilient earnings growth, with a net 37% expecting double-digit growth over the next 12 months, the most since August 2021.
Managers have been buoyed by macroeconomic and geopolitical conditions. A record 56% of respondents expect a ‘no landing’ scenario as central banks aim to tackle inflation, while a further 34% expect a soft landing, the lowest since April 2025. When asked whether the Federal Reserve will hike before US midterms, 72% said no.
Meanwhile, looking ahead to the upcoming US mid-term elections, investors suggest there will be no sweep for the democratic party, with respondents suggesting the most likely outcome is a split between a democratic house and republican senate.
“Expectations for a Dem sweep (democratic house and democratic senate) fell to 23% from 27%,” the report noted.
In such scenario, 37% of investors expected bond yields to rise and stocks to fall. Another 17% expect "bond yields down, stocks up" and 16% expect "bond yields down, stocks down." Just 9% expect a "boom" scenario in which both bond yields and stocks rise.
On the economy, a net 14% expect stronger economic growth in the next year, down from 21% last month, although growth expectations have risen to the strongest since February.
Around half (49%) said they expected stagflation – below-trend growth and above-trend inflation – while 43 expect a ‘boom’ of above-trend growth and inflation, the highest reading for this since February 2022.
Where are people investing?
According to the August reading, 53% of investors said long global semiconductors remains the most-crowded trade, although this is down from the record high 82% figure recorded last month.
Short Japanese yen is the second-most crowded trade, despite the US intervening to buy more of the currency in an attempt to discourage investors from profiteering from the carry trade.
Among survey respondents, investors increased their overweight in US equities for the second straight month to a net 27%, the highest since December 2024. They also reduced underweights to consumer discretionary (net 12% from 22% in July) and staples (19% versus 32%).
However, the biggest change was a move into energy, where investors expect Brent oil to trade at $76 per barrel (weighted average forecast) by the year-end, up from July's forecast of $71.
Despite this, energy remains a small net underweight position, as the chart below shows.
Bonds, UK stocks and consumer staples remain among the most underweighted positions in the market, with emerging markets, banks and tech all leading the most-common net overweights.
The biggest risk to markets remains the possibility that we are in an AI bubble, which took the top spot among investors’ concerns. However, this dropped from 45% of respondents to 32%.
Some 71% of survey respondents do not expect one of the AI hyperscalers to announce a capex cut this year, however, up from 61% in July, with just 21% expecting a cut from one of the tech giants.
AI hyperscaler capex is believed to be the most likely source of a systemic credit event, and a “disorderly rise in bond yields” was the second largest fear cited among investors, with 27% noting it as their largest worry. This overtook a second wave of inflation, which garnered 25% of the vote.
The Bank of America Global Fund Manager survey interviewed 180 panellists with $525bn in assets under management between 7 and 13 August.