Investors remain optimistic about global economic outlookInflation concerns easeBiggest tail risks are second-wave inflation, AI bubble and disorderly rise in bond yieldsExpectations for interest rates are now the highest since September 2022Long global semiconductors is the most crowded trade on record (80%)AI sector still seen in boom stage (56%), “euphoria” seen rising (21%)US dollar positioning turns neutralGold seen as fairly valued for the first time since February 2024Spain seen as favoured to win the 2026 FIFA World Cup
The Bank of America Global Fund Manager Survey (FMS) is one of the most influential monthly reports in the financial world. It polls roughly 200 to 400 institutional fund managers (people managing hundreds of billions of dollars in hedge funds, pension funds, and mutual funds) to see how they are positioned in the markets.
It’s useful as a contrarian indicator. In fact, when positioning gets overstretched on one side or the other, the risk of aggressive unwinding increases. Complacency is punished in the markets. There’s generally a catalyst triggering the reversals or just multiple factors signalling an inflection point.
In June, the FMS showed investors reduced risk exposure but remained increasingly optimistic about the global economic outlook. Just 1% of fund managers now expect weaker global growth over the next 12 months, a sharp improvement from 14% in May and 36% in April, signalling stronger confidence in economic resilience. Inflation concerns also eased, with 45% expecting higher inflation, down from 66% in May.
The biggest risks identified by investors were second-wave inflation (34%), an AI bubble (28%), and a disorderly rise in bond yields (19%). Expectations for interest rates are now the highest since September 2022.
The most crowded trade remained long global semiconductors, with 80% of fund managers holding that view in June, a record high for the survey. This was followed by long Magnificent Seven tech stocks (12%) and long oil (4%).
On AI, most investors believe the sector is still in the “Boom” stage (56%), while 21% see “Euphoria”, suggesting optimism remains high but bubble concerns are rising.
On the US dollar, FMS investors were the least underweight (3%) since March 2025, suggesting the extreme bearish positioning turned neutral. Gold is also seen as fairly valued for the first time since February 2024.
On contrarian trades, BofA suggests long bonds, Europe, consumer, REITs; and short commodities, semiconductors, materials and banks.
The survey also asked about the winner of the 2026 FIFA World Cup. 22% favored Spain, 19% France, 8% England, 8% Brazil, 8% Argentina, 6% Portugal and 3% Germany.
Overall, BofA concluded the survey does not signal a major market top, but rather shows investors are taking some profits and adopting a more cautious summer stance while staying broadly bullish on growth and risk assets.
The tail risk, in my opinion, is that the data supports Fed rate hikes and the tightening leads to a nasty stock market correction and increased recession fears.
This article was written by Giuseppe Dellamotta at investinglive.com.