BofA survey triggers sell signal as cash hits 'uber-low'
A surge in investor optimism has pushed cash levels down enough to trigger Bank of America's contrarian sell signal, even as fund managers rank an AI bubble as the market's biggest tail risk.
Global fund managers are the most bullish they have been since February, but their aggressive positioning has triggered a formal warning signal. Bank of America's July survey shows cash allocations plummeting to 3.6 per cent, down from 4.1 per cent in June. The bank described this drop to an "uber-low" level as a trigger for its contrarian sell signal.
The broad shift in sentiment is driven by a combination of renewed confidence in economic growth, heavy artificial intelligence spending, and expectations for easier monetary policy. A record 54 per cent of respondents now expect a "no landing" scenario for the global economy, where growth simply continues without decelerating. Just 2 per cent of investors surveyed anticipate a hard landing.
This macro confidence is translating directly into heavy equity allocations. Investors pushed U.S. stocks to their highest overweight position since December 2024. Long positions in global semiconductor stocks remained the market's most crowded trade for a third consecutive month, cited by a massive 82 per cent of those polled.
However, the survey exposes a striking contradiction in how investors are approaching the technology sector. While some fund managers trimmed their technology holdings in July, not a single respondent reported being short the sector. This unwavering exposure comes even as 45 per cent of investors pointed to an AI bubble as the single largest tail risk facing markets. Furthermore, 61 per cent of respondents said they believe hyperscalers are unlikely to cut capital expenditure this year, compared to 28 per cent expecting reductions.
On monetary policy, expectations are firmly anchored, with 83 per cent of investors ruling out a Federal Reserve rate hike before the U.S. midterm elections in November. Commodity forecasts shifted sharply downward, with fund managers cutting their end-2026 oil price forecast to $71 a barrel from $86 in June.
The survey results carry a notable timing caveat for market participants. Polling took place between July 2 and July 9, immediately following an interim deal to end the U.S.-Iran war but largely before hostilities resumed. The current geopolitical reality may already be testing the extreme optimism captured in these figures.
