Fund managers stay hugely bullish

Fund managers remain in strikingly bullish form, with big allocations to stocks and commodities accompanied by notably low cash levels. 

Professional investors have their biggest overweight position to shares since February this year, amounting to 34% on a net basis. They also have a net 17% overweight to commodities, the highest level since September 2022. Cash levels are “very low” at just 3.7%. 

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The findings of the November issue of the Bank of America Global Fund Manager Survey mark the continuation of a trend from October’s report, where respondents seemed optimistic about the state of the economy even as concerns emerged about the prospects of an artificial intelligence (AI) bubble. 

The November report pointed to optimistic expectations for the economy, with 53% of respondents expecting a soft landing in the next year, 37% predicting no landing and just 6% seeing a hard landing on the cards. Global growth expectations turned positive for the first time since December 2024. 

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On the AI theme, 53% said that it was increasing productivity, although some respondents did point to concerns that companies were “over-investing”. This was the first time since August 2005 that respondents pointed to such a concern, with a net 20% saying companies were over-investing.  

“This jump is driven by concerns over the magnitude and financing of the AI capex boom,” the report said. 

Meanwhile, an AI bubble was again identified as the number one tail risk facing investors, while concerns about the weight of money sitting behind some of the market darlings have not gone away.  

Having a long position on the Magnificent Seven stocks came out as the most crowded trade, with 54% of respondents pointing to this option. This overtakes last month’s most crowded trade, long gold, which has dropped from 43% to 28%. 

Looking beyond global stocks, respondents were especially bullish on emerging markets and healthcare but have cut exposure to the UK and consumer discretionary shares. Respondents also lightened up on tech exposure, which saw its biggest cut in eight months.