MILAN, July 14 - Investor sentiment among fund managers has surged to its strongest reading since February, with respondents pointing to brighter prospects for growth, sustained capital spending related to artificial intelligence and a more dovish outlook for the Federal Reserve, according to Bank of America’s latest Global Fund Manager Survey.
The survey, carried out between July 2 and July 9 - a period that followed an interim pact to pause the U.S.-Iran war and largely preceded the resumption of hostilities - found cash allocations at an "uber-low" of 3.6% in July, down from 4.1% in June. That level again activated BofA’s contrarian sell signal.
Respondents displayed a notably bullish macro stance. A record 54% said they expect a "no landing" scenario for the global economy, while just 2% anticipated a hard landing. Portfolio shifts reflected that optimism: allocations to U.S. equities rose to the most overweight position since December 2024.
Technology and semiconductors remained focal points for positioning. Long positions in global semiconductor stocks were identified as the market’s most crowded trade for a third month in a row, cited by 82% of those surveyed. Although some managers trimmed technology exposure in July, none reported being short the sector.
Expectations around corporate capital expenditure tied to AI also supported bullishness. Sixty-one percent of respondents said hyperscalers are unlikely to cut capital expenditure this year, while 28% expected reductions. At the same time, AI-related risks registered prominently: 45% of fund managers pointed to an "AI bubble" as the largest tail risk facing markets.
Monetary policy expectations shaped positioning as well. Eighty-three percent of respondents said they do not expect the Federal Reserve to raise interest rates before the U.S. midterm elections in November, a finding consistent with the survey’s broader theme of hopes for easier policy.
Energy market expectations shifted lower in the July survey. Investors trimmed their end-2026 oil price forecast to $71 per barrel, down from $86 in June.
Key points
- Record 54% of fund managers expect a "no landing" global economy; only 2% foresee a hard landing - impacts equities and macro outlook.
- U.S. equity allocations at the highest overweight since December 2024; semiconductors remain the most crowded trade, cited by 82% - impacts technology and chip sectors.
- End-2026 oil price forecast cut to $71 from $86 in June - impacts energy and commodity-sensitive sectors.
Risks and uncertainties
- AI bubble concern - 45% of respondents identified AI bubble risk as the top tail risk facing markets, a key vulnerability for technology and related capital expenditure.
- Geopolitical uncertainty - the survey was conducted after an interim U.S.-Iran deal and largely before hostilities resumed, underscoring the potential for renewed conflict to affect markets, particularly energy.
- Oil price volatility - the sharp revision of the end-2026 oil forecast highlights uncertainty for the energy sector and commodity-exposed businesses.
The July Bank of America survey paints a picture of pronounced investor optimism centered on growth, AI spending and expectations for easier U.S. monetary policy, while also flagging concentrated positioning in semiconductors and material concerns about an AI-driven market bubble. Cash levels at historic lows and refreshed positioning in U.S. equities and technology underline how these views are being translated into portfolios.