Global investor sentiment surged to its highest level since February, according to Bank of America's July Global Fund Manager Survey, as optimism around artificial intelligence spending and expectations of a more accommodative Federal Reserve buoyed market confidence.
The survey, conducted from July 2 to July 9, revealed a sharp rebound in investor optimism, with fund managers increasingly bullish on economic growth, AI-driven capital expenditure, and the likelihood of easier monetary policy. Cash allocations dropped to an "ultra-low" 3.6% in July from 4.1% in June, triggering BofA's contrarian sell signal—a level that historically suggests elevated investor confidence.
Record 'No Landing' Expectations
A record 54% of respondents now expect a "no landing" scenario for the global economy, where growth remains resilient without a sharp slowdown. Only 2% anticipate a hard landing, underscoring the prevailing optimism. This shift reflects growing confidence that the economy can sustain its momentum even as central banks navigate inflation and policy adjustments.
Fund managers also increased their exposure to US equities, with allocations reaching their highest overweight position since December 2024. The technology sector continued to attract strong support, with none of the respondents holding a short position in tech stocks during July, despite some trimming of holdings.
Semiconductor Trade Remains Crowded
For the third consecutive month, long positions in global semiconductor stocks were identified as the most crowded trade, with 82% of respondents citing it as the top crowded position. This sustained preference reflects continued confidence in companies poised to benefit from rising AI investment. A majority of investors (61%) do not expect hyperscale technology companies to cut capital expenditure in 2026, while 28% anticipate reductions.
However, AI-related risks remain a key concern. The survey found that 45% of respondents view an AI bubble as the largest tail risk facing financial markets, making it the top worry among investors. This caution comes even as AI spending drives market enthusiasm, highlighting a potential divergence between near-term optimism and longer-term risks.
Fed Policy and Oil Price Outlook
Expectations for US monetary policy remained largely accommodative, with 83% of respondents not expecting the Federal Reserve to raise interest rates before the November midterm elections. This dovish outlook has supported risk appetite across asset classes.
Meanwhile, investors have become less bullish on oil prices. The survey showed fund managers lowering their year-end 2026 oil price forecast to $71 per barrel, down from $86 per barrel in June, reflecting shifting supply-demand dynamics and broader economic considerations.
Overall, the BofA survey paints a picture of renewed investor confidence driven by AI spending and Fed policy hopes, even as concerns about a potential AI bubble linger. For investors, the data suggests a market that is increasingly pricing in a resilient economy and continued tech-led growth, but with cautionary notes on valuation and concentration risks.
This article is for informational purposes only and does not constitute financial advice.
