Global fund managers reduced cash allocations to 3.5% in August, the sixth-lowest level since 1998 and down from 4.5% at the start of 2024, according to Bank of America’s latest survey. The decline triggered a contrarian sell signal under BofA’s cash rule, which flags allocations at or below 4%.
Equity positioning surged to a net 56% overweight, the highest since November 2021, with U.S. allocations at a net 27% overweight—their strongest level since December 2024. Fund managers have maintained an overweight stance toward equities for 14 consecutive months, reflecting growing confidence in risk assets amid shifting economic expectations.
Economic sentiment indicators showed 56% of managers expect a "no landing" scenario, the highest since February 2022, while 43% forecast a "boom" outcome. In Asia, 59% of fund managers are rotating into defensive, value, and cyclical stocks to mitigate downside risks tied to artificial intelligence sector volatility.
Industrial production grew 0.2% in July, missing the 0.3% estimate, while credit card balances rose 3% year-over-year. Inflation remained within a 2.5% to 3% range, providing a backdrop for risk-on positioning.
Year-to-date performance through August 18 highlighted a preference for high-dividend and low-volatility strategies. The iShares Core High Dividend ETF (HDV) led gains with a 21.76% return and a 3.00% dividend yield, while the SPDR S&P Dividend ETF (SDY) advanced 13.32% with a 2.35% yield. The Vanguard Real Estate ETF (VNQ) rose 11.60% with a 3.51% yield, and the Invesco S&P 500 Low Volatility ETF (SPLV) gained 7.27% with a 2.12% yield.
Fixed-income ETFs underperformed, with the iShares 20+ Year Treasury ETF (TLT) down 6.81% and the iShares Investment Grade Corporate ETF (LQD) falling 4.28%. Short-duration Treasuries, represented by the iShares 1-3 Year Treasury ETF (SHY), declined 1.03%, while the JPMorgan Money Market ETF (JMMF) delivered a negligible 0.01% return. Gold, tracked by AAAU, rose 0.44% year-to-date but surged 31.6% over the past 12 months.
A proposed cash alternative portfolio suggested a 40% allocation to HDV, 25% to VNQ, 20% to SPLV, and 15% to AAAU, yielding approximately 3.1%.
