Bank of America Fund Manager Survey: Equity Holdings Hit Nearly Five-Year High, but Hartnett Says "It's Time to Exit"

According to Zhihui Finance APP, the latest global fund manager survey by Bank of America shows that bullish global investors have raised their equity holdings to the highest level in nearly five years, with very few bears remaining. The strategy team at Bank of America, led by Michael Hartnett, indicated that a net 56% of surveyed fund managers are overweight in equities—a proportion reaching the highest level since November 2021—while cash allocation has dropped to an "extremely low" 3.5%.

The Hartnett team stated: "The market consensus is that the macroeconomy will not land, the Federal Reserve will not raise rates, AI capital expenditure will not be cut, the Democratic Party will not achieve a sweeping victory, and the bears will not prevail." However, they also warned that current positioning signals “continue to suggest investors should retreat or rotate within risk assets, rather than increase positions,” and reiterated their recent shift toward more defensive sectors.

Bank of America's August global fund manager survey shows investor sentiment is extremely optimistic

The August survey shows that investors anticipate the Federal Reserve will not raise rates before the November midterm elections, and that the Democratic Party will not dominate the midterms in a way that would disrupt market gains.

Fund managers generally believe the economy will not show significant weakness, and that companies heavily investing in AI infrastructure will continue to ramp up spending.

Hidden Concerns Behind the Optimism

However, since the S&P 500 hit a record closing high on August 13, a note of caution has quietly seeped into the equity market. Concerns about rising long-term bond yields are intensifying, reflecting investor anxieties over inflation and the debt-fueled AI boom. In addition, U.S. President Trump stated he has no intention to extend the expired ceasefire agreement with Iran, a stance that has triggered another spike in oil prices.

Bank of America conducted this survey from August 7 to 13, with 180 respondents managing a combined $525 billion in assets. Bank of America strategists pointed out this was the third most optimistic monthly reading on investor sentiment since 2022.

AI: A Mix of Faith and Fear

Among respondents, “long global semiconductors” remains the most crowded trade, though the degree of crowding has dropped sharply from last month—a net 53% chose this trade, down from 82% in July.

Investors regard the AI bubble as the biggest tail risk, while capital expenditure by mega-cap companies is seen as the factor most likely to trigger a credit event.

Nevertheless, a net 71% of respondents expect AI spending will not be cut this year, and 58% believe that AI technology will not have a significant impact on the labor market until at least 2028.

As for sector allocation, respondents increased positioning in technology, banking, and energy sectors in August, while cutting exposure to industrials and healthcare, and covering shorts in both consumer staples and consumer discretionary sectors.

In addition, a net 16% of respondents judge gold to be undervalued, the highest since March 2023; a net 39% think the U.S. dollar is overvalued, up from 34% last month.