Global fund managers are the most bullish on equities since February, but Bank of America’s October Global Fund Manager Survey shows growing unease that markets are slipping into an AI-driven bubble.
Stock allocation has climbed to an eight-month high, while bond exposure is at its lowest since late 2022. Cash levels have dropped to just 3.8%, signalling aggressive risk-taking, and liquidity conditions are viewed as the best since September 2021.
Investors have largely abandoned recession fears, with expectations for a soft landing rising to 54%.
Growth optimism has posted its biggest six-month jump since 2020. That optimism has pushed positioning aggressively pro-risk, with commodities at the most overweight since early 2023 and emerging-market equities at their highest allocation since 2021.
At the same time, cash has been cut to its most underweight level since late 2024.
Yet beneath the bullish positioning, concern about valuations is mounting. A record 60% of surveyed investors now say global equities are overvalued, and 54% believe AI-related assets are in bubble territory.
AI was cited as the top perceived tail risk, overtaking inflation and geopolitics, while “long gold” was named the most crowded trade.
"A 2nd wave of inflation (27%), ‘Fed loses independence & US dollar debasement’ (14%), complete the podium of the biggest tail risks this month," BofA strategist Michael Hartnett wrote in a survey note.
He also noted that the trade war risk (5%) has "eased significantly since peaking in April," when a record 80% surveyed investors identified it as the single biggest tail risk.
BofA notes that investors appear to believe the return potential still justifies the risk, even as positioning stretches. Private credit was identified as the top candidate for a systemic event, pointing to cracks emerging beneath the surface of optimism.
Despite that, FMS positioning implies that investors are not yet positioned defensively — contrarian signals identified by the survey include long bonds versus short stocks and a rotation back into staples from banks.
Source :
https://www.investing.com/news/stock-market-news/bofas-survey-shows-54-of-investors-say-ai-in-bubble-60-say-stocks-overvalued-4284842
