Fund managers are embracing a renewed optimism as recession fears ease, according to Bank of America’s latest Global Fund Manager Survey. Global investor sentiment has surged to its highest level since February, reflecting a positive outlook on the economy, increased spending linked to artificial intelligence, and expectations for a dovish Federal Reserve.
Fund managers: Shifting Investment Strategies
The survey, conducted between July 2 and July 9, reveals a significant drop in cash allocations among fund managers, falling to an ‘uber-low’ of 3.6 per cent from 4.1 per cent in June. This change in allocation suggests a growing confidence in market conditions, as the low cash levels typically indicate a contrarian sell signal.
No Landing Scenario Gains Traction
Among the key findings, a record 54 per cent of respondents anticipate a ‘no landing’ scenario for the global economy, meaning they expect continued growth without a recession. In stark contrast, only 2 per cent foresee a hard landing, indicating a widespread belief that the economy will maintain its momentum.
US Equity Overweights Rise
Investors have also increased their allocations to US equities, reaching the highest overweight position since December 2024. This shift highlights a renewed confidence in the US market, with fund managers betting on its resilience and growth potential.
Technology and Semiconductor Insights
Long positions in global semiconductor stocks continue to dominate as the most crowded trade for the third consecutive month, with 82 per cent of investors citing this sector. While there has been some trimming of technology positions in July, none of the surveyed fund managers reported shorting the sector, indicating a robust belief in its future performance.
Hyperscalers and Capital Expenditure
Regarding capital expenditure, 61 per cent of respondents believe that hyperscalers are unlikely to reduce their spending this year, contrasting with 28 per cent who expect cuts. This optimism surrounding technological giants further underscores the positive sentiment in the market.
Acknowledging Risks
Despite the optimism, investors are wary of potential risks. The survey indicates that concerns over an AI bubble have risen to the forefront, with 45 per cent of respondents identifying it as the largest tail risk facing markets. This caution reflects a balanced view amid the prevailing optimism.
Federal Reserve Expectations
Looking ahead, 83 per cent of fund managers do not anticipate the Federal Reserve raising interest rates before the US midterm elections in November. This expectation contributes to a favourable investment climate, as stable interest rates can support economic growth.
Oil Price Forecast Adjustments
In terms of commodities, investors have adjusted their end-2026 oil price forecast down to $71 a barrel from $86 in June. This revision reflects changing views on the global oil market and potential supply-demand dynamics.
