Investor sentiment has strengthened sharply in November, with Bank of America’s latest Global Fund Manager Survey showing the most bullish positioning in months.
Fund managers have lifted exposure to risk assets and reduced cash holdings to 3.7 per cent, a level the survey identifies as a traditional “sell” signal.
BofA said its broadest measure of sentiment, combining cash levels, equity allocation and global growth expectations, has risen to 6.4 from 5.7, the highest since February. Historically, sentiment at these levels often coincides with market peaks.
On the macro outlook, 53 per cent of investors expect a soft landing for the global economy, 37 per cent anticipate no landing, and just 6 per cent foresee a hard landing.
Global growth expectations have turned positive for the first time since December last year, with a net 3 per cent now expecting a stronger economy in the next 12 months.
BofA noted that optimism around productivity is spreading with 53 per cent of respondents believing artificial intelligence is already boosting output, while 15 per cent expect that impact in 2026.
However, for the first time in two decades, a majority of fund managers now believe companies are “overinvesting,” with particular concern about excessive AI-related capital expenditure.
Positioning data reveal stretched exposure to risk assets with a net 34 per cent of respondents remaining overweight global equities, and 17 per cent are overweight commodities — the highest level since September 2022.
The most crowded trade continues to be “long Magnificent 7,” cited by 54 per cent of investors, while 45 per cent see an “AI bubble” as the biggest tail risk.
Private markets have emerged as the most likely source of the next credit event, with 59 per cent pointing to private credit or private equity as the top risk, the highest conviction reading since the question was introduced in 2022.
Regional and sector allocations show fund managers most overweight emerging markets, healthcare and banks, while the UK and consumer discretionary stocks have seen the steepest reductions.
Exposure to UK equities has dropped by 27 percentage points since August (the sharpest three-month decline since late 2022) and discretionary holdings have fallen by a record 16 points.
Looking to the year ahead, 42 per cent of respondents expect international equities to be the best-performing asset class, followed by 22 per cent citing US stocks.
The MSCI Emerging Markets index and the Nasdaq are seen as likely outperformers, while 30 per cent expect the Japanese yen to be the best-performing currency.
The survey found that current positioning represents a headwind rather than a tailwind for further risk rallies, as BofA cautioned that “froth may correct further without a Federal Reserve rate cut in December.”
Emerging markets and banks are viewed as most vulnerable to a potential fourth-quarter risk-off move, while retail and UK assets may offer contrarian upside.
