Risk appetite has returned forcefully to global markets. The May Global Fund Manager Survey (FMS), conducted by Bank of America, shows a significant shift in institutional investor positioning, with fund managers increasing their allocation to equities at a record pace while reducing cash levels and deepening exposure to cyclical and technology sectors.
The move reflects a meaningful change in managers’ macroeconomic outlook, supported by more favorable expectations for corporate growth and a less restrictive monetary environment in the United States.
According to the survey, cash levels in portfolios fell from 4.3% to 3.9%, one of the sharpest declines in recent months, while BofA’s Bull & Bear indicator rose to 7.8 points, approaching levels historically associated with market overheating signals.
Optimism regarding corporate earnings is one of the main drivers behind the move. The report identifies a record jump in the number of managers expecting double-digit earnings-per-share (EPS) growth, in an environment where fears of a severe slowdown appear to be fading rapidly. Only 4% of respondents now anticipate a “hard landing” for the global economy.
Expectations of rate cuts by the Federal Reserve are also driving the repositioning. Only 16% of participants expect rate hikes through 2026, although concerns remain that the Fed could fall “behind the curve” on inflation. In fact, 40% of managers identify inflation precisely as the main tail risk for markets.
That concern is reflected particularly in the fixed-income market. Sixty-two percent of respondents expect the yield on the 30-year U.S. Treasury bond to reach 6%, compared to only 20% who foresee levels closer to 4%. This view helps explain why investors maintain one of the largest underweights in bonds since 2022.
Sector positioning also shows clear signs of concentration. Seventy-three percent of participants consider being long global semiconductors to be currently the most crowded trade in the market, amid continued enthusiasm surrounding artificial intelligence and the expansion of technology infrastructure linked to hyperscalers and data centers.
Paradoxically, those same technology segments are beginning to be perceived as potential sources of financial vulnerability. Thirty-four percent of managers identify AI hyperscalers as possible triggers of a significant credit event, second only to shadow banking, which tops the list at 42%.
The survey also reveals one of the most aggressive positions in cyclical assets since 2018. Managers show the largest overweight in technology since February 2024 and the fourth-highest historical exposure to commodities. By contrast, defensive sectors and consumer discretionary lag behind within global preferences.
Geographically, the survey also highlights the first underweight position in Eurozone assets since December 2024, while emerging markets continue benefiting from renewed flows into risk assets.
Despite the dominant optimism, the report itself warns about signs of complacency. From a contrarian perspective, strategists suggest that some investors may begin taking profits on long positions in equities, technology, commodities, and emerging markets, particularly if bond yields continue climbing.
The underlying message for markets is clear: Wall Street has returned to “risk-on” mode, but the sustainability of the rally will depend less on the growth narrative and more on the future path of inflation and long-term rates in the United States.
