Investor sentiment reached its most bullish level since February, driven by a surge in profit expectations and a record jump in risk appetite, according to Bank of America’s July Global Fund Manager Survey.
Cash allocations dropped to 3.9%—the lowest level since early 2022—triggering BofA's proprietary “sell signal.”
Despite this, equity positioning remains below historical extremes, and bond market volatility is still muted.
BofA said optimism about corporate earnings has surged to the highest in five years, while the shift toward risk-on behavior reflects a broader belief that markets have entered a sustainable growth phase.
“Sentiment is toppy, but not euphoric,” the note said. “Greed is harder to reverse than fear.”
Fund managers continue to rotate between sectors rather than abandon risk altogether. Cyclical and growth stocks have seen increased exposure, while defensives lag.
The renewed optimism comes against a backdrop of:
Resilient U.S. equity markets nearing all-time highs
Improving global PMI data
Continued low volatility in government bonds
To track valuation levels, sentiment ratios, and sector exposures, refer to:
đź“Š Ratios (TTM) – Fundamental Market Metrics
Access trailing twelve-month valuation, profitability, and liquidity ratios for major indices and sectors.
While the drop in cash signals rising risk tolerance, BofA warned of potential corrections should macro surprises or earnings disappointments emerge. For now, fund managers are opting for tactical sector plays over broad risk-off positioning.
