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Bullish Sentiment Dips Slightly but Still 'Unambiguous': BofA

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What You Need to Know

  • A net 84% of survey participants said they expect a stronger global economy in the next 12 months.
  • Investors said their top tail risk was inflation, followed by a taper tantrum.
  • Investors moved their expectations of a Fed rate increase forward two months, to November 2022.

Investor sentiment is “unambiguously” bullish, according to the latest global fund manager survey from Bank of America Global Research.

A net 84% of survey participants said they expect a stronger global economy in the next 12 months, down 6 percentage points from the April survey but still near record highs. 

The survey was conducted May 7 to May 13 among 216 investors with $625 billion in assets under management.

BofA noted that the fund manager survey has recorded five episodes of peak optimism since 1994 that were followed by a 75-point drop in the Treasury yield, but that today the Federal Reserve’s policy stance is different. So “uber-easy,” in fact, that investors’ top tail risk in the May survey was inflation, cited by 35% of respondents, followed by a taper tantrum, cited by 27%.

A year ago, the coronavirus was investors’  No. 1 tail risk.

Over the next 12 months, 69% of investors expect above-trend growth and above-trend inflation, up 12 points month-over-month and the highest-ever reading.

A net 78% of investors expect global profits to improve over the next 12 months, also down 6 points but still near all-time highs.

Investors in the new survey moved their expectations of a Federal Reserve rate increase forward two months, to November 2022, driven by a big jump in the number of respondents who think an increase is likely in the first half of 2022, now at 21%, an 11-point increase from April.


Fund managers’ cash level remained flat in May at 4.1%. The fund manager cash rule holds that when average cash balance rises above 4.5%, a contrarian buy signal is generated for equities, and when the cash balance falls below 3.5%, a contrarian sell signal is generated. 

Cash allocation increased 10 points from last month to 9% overweight, its highest level since October.

Investors’ equity allocation receded 8 points in May to net 54% overweight, while their bond allocation remained steady at net 68% underweight, its lowest level since February 2018.

In May, fund managers rotated out of utilities and staples and into banks, health care, industrials and materials stocks. Allocation to banks remained steady at net 30% overweight, making them the top sector overweight for the second month in a row.

At the same time, technology took a hit, falling from 20% overweight in April to net 11% overweight. 

Forty-three percent of investors said long Bitcoin was the most crowded trade in May, followed by 21% who said long tech and 20% who cited long ESG. 

Value remained the most favored factor in May, according to 48% of investors, but two other factors enjoyed big comebacks: High-quality earnings jumped to 41% from 17% in April, and high dividend yield rose to 39% from 24%. In contrast, small-caps fell from 24% in favor in April to 14% in May.


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