Fund managers rarely this bullish on stocks as cash hits 3.5%

Global fund managers are rarely this bullish on stocks, with cash at 3.5% and equity allocations at a five-year high, BofA's August survey shows.

"Positioning argues for investors to retreat or rotate within risk assets rather than reload," said Michael Hartnett, chief investment strategist at Bank of America.

The survey of 203 investors managing $581 billion was the third-most bullish since 2022. Equity allocations rose to a net 56 percent overweight, the highest since November 2021, while average cash fell to 3.5 percent of assets — near a record low since the turn of the millennium. BofA's Bull & Bear Indicator stood at 9.3, above the 8.0 level that historically triggers a sell signal.

The reading matters because BofA's contrarian cash rule generates a sell signal when cash falls to 4 percent or below; at 3.5 percent, positioning is well beyond that threshold. Fed Chair Kevin Warsh speaks at the Jackson Hole symposium Aug. 27-29, with 53 percent of managers expecting a neutral tone, 31 percent hawkish and 7 percent dovish.

Bullish Consensus Hits an Extreme

A record 56 percent of fund managers expect a "no landing" scenario over the next 12 months, while only 4 percent anticipate a hard landing. Some 37 percent expect global corporate earnings to rise at least 10 percent — the strongest reading since August 2021. On monetary policy, 72 percent believe the Fed will not hike before the November midterms, and 71 percent do not expect an AI hyperscaler to cut capital expenditures in 2026.

Expectations for a Democratic sweep of Congress slipped to 23 percent from 27 percent. Technology allocation rose to a net 30 percent overweight, the most since May, matching banks at 30 percent. Energy underweights shrank to 3 percent from 20 percent, while U.S. equity exposure reached a net 27 percent overweight, the highest since December 2024. Gold was seen as undervalued by a net 16 percent of respondents, the most since March 2023.

Everyone Is Crowded Into the Same Trades

"Long global semiconductors" remains the most crowded trade, selected by 53 percent of respondents — down from 83 percent in July — and is most commonly expressed through the VanEck Semiconductor ETF (SMH) or the iShares Semiconductor ETF (SOXX). The AI boom is also the survey's biggest tail risk: 32 percent identify an AI bubble as the biggest threat to markets, while 38 percent say AI hyperscaler capital spending is the most likely source of a systemic credit event.

Hartnett's list of contrarian trades runs directly against the crowd: long bonds against short commodities, long consumer staples against short technology, long consumer discretionary against short banks, and long U.K. equities against short U.S. equities.

The survey suggests a market that has already answered every question in front of it. With positioning stretched and the consensus uniformly bullish, the risk is that any disappointment — a hawkish turn from Warsh at Jackson Hole, a surprise AI capex cut, or a hard-landing data point — triggers a sharp unwind of crowded trades. For investors, the setup argues for trimming exposure to the most crowded corners of the market rather than adding to them.

This article is for informational purposes only and does not constitute investment advice.