Fund manager sentiment is at its highest level since July 2021, while portfolio allocation to cash reached a record low of 3.3%, down from 3.7%, according to Bank of America’s (BAC) December Global Fund Manager Survey (FMS).
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The survey, which collects responses from 238 fund managers with a combined $364 billion in assets under management and began in 1999, also showed allocations to stocks and commodities at their highest level since February 2022.
Low Cash Levels Signal Risk for Global Stocks
The survey presents a bearish backdrop, as cash allocations below 3.5% have historically led to poor returns for the MSCI All Country World Index. Bank of America recommends buying global stocks when allocation to cash is above 5% and selling stocks when cash is below 4%.
“Liquidity is likely as good as it gets, which has buoyed stocks in 2025, with lots of money chasing a few ideas,” said Savita Subramanian, Bank of America’s Head of U.S. Equity and Quantitative Strategy.
The firm also noted that the Magnificent 7 trade remains crowded and that an AI bubble is the stock market’s biggest tail risk.
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