Global fund managers have increased equity allocations to the highest level since November 2021, with 56% overweight in equities, according to Bank of America’s August survey of 180 participants managing $525 billion in assets.
Cash holdings among managers fell to 3.5%, described as "extremely low," while the S&P 500 reached a record close on August 13. The survey, conducted from August 7 to 13, reflects growing confidence despite rising concerns over longer-term bond yields and inflation. Michael Hartnett, chief investment strategist at Bank of America, noted the consensus expects no economic cooling, no Federal Reserve rate hike, and no cuts to AI capital expenditure this year.
Long positions in global semiconductor stocks remained the most crowded trade, though sentiment eased slightly to 53% from 82% in July. Meanwhile, 71% of respondents do not expect AI spending reductions in 2026, and 58% anticipate AI’s impact on the labor market no earlier than 2028.
Investor caution has risen following the S&P 500’s record close, driven by nervousness over elevated bond yields and geopolitical tensions. The survey also highlighted oil price increases due to U.S. President Donald Trump’s stance on Iran, while an AI bubble is viewed as the primary tail risk. Hyperscaler capital expenditures are seen as the most likely catalyst for a potential credit event.
The Democratic Party’s midterm election prospects and the absence of bearish sentiment among managers further underscore the prevailing risk-on stance.
