Bullish global investors have ramped up their stock holdings to the highest in almost five years, leaving no room for pessimists, according to Bank of America Corp.’s Michael Hartnett.
A net 56% of fund managers polled in the bank’s latest industry survey are overweight equities, the highest level since November 2021, a team of BofA strategists led by Hartnett said. Cash allocations are down to an “uber-low” 3.5%.
“Consensus conviction is no macro landing, no Fed hike, no AI capex cut, no DEM sweep, no bears,” Hartnett and his colleagues wrote. “Positioning continues to recommend investors retreat or rotate within risk assets rather than reload,” they said, reiterating their recent call for a move into more defensive parts of the market.
The August survey indicates that investors expect no Federal Reserve interest-rate increase before November’s midterms and that those elections won’t produce a strong showing by the Democratic Party that could potentially disrupt the rally.
The broad view among fund managers is that there will be no major weakening in the economy and that companies investing heavily in artificial intelligence infrastructure will continue their spending.
Since the S&P 500 index’s latest record closing high on Aug. 13, caution has crept into equity markets. There’s growing nervousness over rising yields on longer-maturity bonds, reflecting concern over inflation and the debt-fueled AI boom. In addition, US President Donald Trump’s stance that he isn’t interested in extending the expired ceasefire agreement with Iran has triggered a renewed increase in oil prices.
BofA conducted its survey from Aug. 7 to Aug. 13, with 180 respondents overseeing a combined $525 billion in assets under management. The strategists said it was the third-most bullish survey of investor sentiment since 2022.
Being long global semiconductors remains the most crowded trade, in the view of respondents, though that has moderated sharply, with a net 53% citing it against 82% last month.
Investors see an AI bubble as the biggest tail risk, while hyperscaler capex is viewed as the most likely source of a credit event. That said, a net 71% expect no cut to AI spending this year, and 58% say the technology won’t disrupt the labor market until 2028 at the earliest.
This article was provided by Bloomberg News.