Bank of America's fund-manager survey of 161 institutional investors managing nearly half a trillion dollars reveals surprising resilience despite market volatility. Cash levels remain below 4%, while inflation expectations hit their lowest point in almost two years. Pessimism surrounding bond markets sits near the lowest level since spring 2025.
A majority of investors project double-digit earnings-per-share growth through 2027, coupled with expectations the Federal Reserve will maintain current policy. The survey indicates a shift in sentiment toward U.S. Treasurys, driven by downward adjustments in inflation forecasts. Fixed-income short covering marked October's most significant bout in the past year.
With cash levels troughing at 3.5% in August and gradually rising to 3.9%, fund managers have refrained from aggressively selling into S&P 500 all-time highs. The market's directional catalyst hinges on whether investors waiting for a 6% 10-year yield will commit to bonds or abandon the wait. Given three-quarters of respondents anticipate no Fed move on October 28, this timing may prove decisive.
A net 47% of participants predict above-trend growth and inflation, marking the highest "boom expectations" since February 2022. When identifying crowded trades, surveyors favored semiconductor positions via SOX at 45% and U.S. Treasury shorts TLT at 27%. The prevailing tail risk remains a disorderly bond-market yield spike at 31%, overtaking concerns regarding an AI bubble.
Contrarian recommendations include allocating to real-estate investment trusts, consumer discretionary and staples stocks, while maintaining bearish positions on emerging markets, technology sectors, and overall equity indices.
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing