**Fund Managers Turn Optimistic as Recession Fears Ease**
Global investor sentiment has reached its highest point since February, signaling a shift in the outlook among fund managers regarding economic growth and spending linked to artificial intelligence (AI). According to the latest Global Fund Manager Survey by Bank of America, optimism is growing, driven by expectations for a dovish stance from the Federal Reserve and increased capital expenditure in AI-related sectors.
The survey, conducted between July 2 and July 9, revealed a notable decrease in cash allocations among fund managers, dropping to an "uber-low" of 3.6% from 4.1% in June. This decline in cash reserves is significant, as it approaches a level that historically triggered a contrarian sell signal from Bank of America. The results indicate a growing confidence in the economy, with a record 54% of respondents predicting a "no landing" scenario, suggesting that they do not foresee a recession in the near future. In stark contrast, only 2% of those surveyed expect a hard landing for the global economy.
The survey also highlighted a shift in investment strategies, particularly in U.S. equities. Fund managers have increased their allocations to U.S. stocks, marking the highest overweight position since December 2024. This optimism is further reflected in the ongoing interest in global semiconductor stocks, which has remained the most crowded trade for three consecutive months, with 82% of investors citing it as a key area of focus.
While some investors have made adjustments to their technology positions, none reported taking short positions against the sector, indicating a general belief in its continued strength. Furthermore, a majority of respondents—61%—believe that major tech companies, often referred to as hyperscalers, are unlikely to cut their capital expenditures this year. Only 28% anticipate any reductions in spending.
Despite the positive sentiment, concerns remain regarding potential risks in the market. The survey identified the risks associated with an AI bubble as the largest tail risk, with 45% of respondents flagging it as a significant concern. This reflects a cautious approach among investors, even as they express optimism about the broader economic landscape.
In terms of monetary policy, 83% of survey participants do not expect the Federal Reserve to raise interest rates before the U.S. midterm elections in November. This expectation of a stable interest rate environment may further bolster investor confidence and spending.
However, the survey also revealed a downward adjustment in oil price forecasts, with investors cutting their end-2026 projections to $71 a barrel, down from $86 in June. This reduction may reflect broader concerns about global demand and supply dynamics in the energy sector.
Overall, the findings from the Bank of America Global Fund Manager Survey indicate a significant shift in sentiment among investors, as fears of a recession ease and optimism about economic growth and AI-related investments rises. As fund managers recalibrate their strategies, the focus on U.S. equities and technology sectors suggests a belief in the resilience of the market, despite underlying risks that continue to warrant attention.