Bank of America’s Global Fund Manager Survey revealed an overwhelmingly bullish sentiment among investors, marked by a considerable decline in cash levels, plummeting to 3.5% – the lowest recorded since 2010.
The survey indicated a clear preference for equities over bonds and cash, with a notable shift towards European equities while moving away from U.S. stocks, although the “Magnificent 7” continues to dominate as the most crowded trade.
The majority of survey participants (88%) foresee a soft landing or no landing at all in 2025, alongside 77% anticipating Federal Reserve rate cuts in the same year.
Here are the key highlights from the survey:
- Cash holdings at 3.5%, reaching a 15-year low, signaling a bold approach towards risk-taking.
- A significant 82% rule out the possibility of a global recession, marking the lowest levels of recession concerns since February 2022.
- A remarkable 89% view U.S. equities as overvalued, hitting a record high since 2001.
- 77% of participants anticipate Federal Reserve rate reductions in 2025, with nearly half predicting two cuts.
- The primary tail risk identified is a global trade war (39%), closely followed by inflation fears (31%).
- An evident rotation from U.S. to European markets is observed, with EuroStoxx emerging as a potential front-runner for 2025.
- A notable 59% anticipate “stagflation” – a scenario characterized by below-trend growth and above-trend inflation.
Bank of America’s survey portrays a landscape where investors are displaying higher risk tolerance, favoring equities, particularly European stocks, while expressing concerns over U.S. equity valuations and the potential for economic headwinds. The anticipation of Fed rate cuts reflects a cautious outlook on the economic horizon, with global trade tensions and inflation fears looming large as key areas of apprehension for market participants.
