Bank of America's most recent Global Fund Manager Survey found investor sentiment elevated, yet not at the degree that historically marks a major market top. The bank's June readings show several signs of optimism alongside modest defensive moves by portfolio managers.
The survey's Bull & Bear Indicator moved to 8.9 in June, a level the bank classifies as a technical "sell signal." At the same time, cash holdings among managers in the survey edged up to 4.1% from 3.9% in May, indicating only a slight increase in liquidity.
"this is not a 'big top' for risk assets," said investment strategist Michael Hartnett, adding that such a turn "will be signaled by bonds & voters."
Macro expectations appear to be firming. Global growth and profit forecasts climbed to three-month highs in the June survey. Expectations for higher interest rates also rose sharply: the proportion of managers anticipating rate increases reached its highest reading since September 2022, with 40% now forecasting Federal Reserve hikes within the next 12 months, up from 16% previously.
Looking ahead to the upcoming FOMC meeting, a majority of respondents - 55% - expect a "hawkish hold" from Fed Chair Kevin Warsh.
Portfolio positioning has shifted more cautiously in certain areas. BofA reports that global equity overweights were reduced from 50% to 38%, while technology exposure declined from 33% to 26%. Europe was cut to the largest underweight seen since December 2024. At the same time, managers increased allocations to Japan, materials and banks. Gold was viewed as fairly valued for the first time since February 2024.
The survey also highlights perceived tail risks and crowded trades. Respondents ranked a "second wave inflation" as the top tail risk at 34%, followed by an "AI bubble" at 28%. Long global semiconductors was identified as the most crowded trade, cited by 80% of fund managers - the highest reading in the survey's history.
On the contrarian front, Bank of America listed long bonds, Europe and consumer stocks as the primary contrarian plays as managers move into the summer period.
These findings paint a picture of a market where sentiment is strong and certain trades are heavily populated, but where the marginal adjustments in cash and regional or sector positioning have not produced the classic, broad-based signals the bank associates with a major market top.