Risk appetite is surging among global fund managers, with equity allocations hitting eight-month highs and cash levels dipping dangerously low. Still, optimism is colliding with mounting fears over private credit blow-ups and a potential AI stock bubble.
The latest Bank of America Global Fund Manager Survey for October reveals a sharp uptick in bullish sentiment, reaching its highest point since February.
The net equity overweight jumped to 32%, the most since early 2025, while the average cash level slipped to 3.8%, below a threshold that triggered a contrarian sell signal.
Risk-On Mode Is Back: Investors Flock To Stocks, Commodities, And EM
Fund managers aggressively reduced bond holdings, with net 24% underweight—the lowest allocation since October 2022. Meanwhile, exposure to emerging market equities surged to 46% overweight, the highest level since February 2021, up from 27% just a month ago.
Commodities are back in favor as well, with a net 14% overweight—the strongest positioning since March 2023.
Investors also swung net overweight U.S. equities for the first time since February, flipping from 14% underweight to 1% overweight in just a month.
Cash, bonds, and defensive sectors like consumer staples were broadly sold off, reflecting a full-throttle shift toward riskier assets.
Investor macro sentiment is also the most optimistic in over a year. Net 69% believe a global recession is unlikely, the lowest level of recession concern since February 2022.
Growth expectations posted the largest six-month jump since October 2020, and 54% now expect a "soft landing", though "no landing" forecasts rose to 33%
AI Bubble, Private Credit Top Investor Fears
Beneath the bullish outlook, anxiety is growing. A record 54% of respondents believe AI stocks are in a bubble. That’s a sharp reversal from September, when only 41% said so.
The AI equity bubble is now viewed as the most significant tail risk by 33% of investors. It’s ahead of inflation and Fed policy shocks. And a record net 60% of investors say global equities are overvalued.
Meanwhile, 57% of fund managers identify private equity and private credit as the most likely source of a systemic credit event, up from 26% last month. That marks the highest conviction on credit risk since 2022.
“Long gold" is now the most crowded trade according to 43% of investors, surpassing "long Magnificent 7" stocks at 39%.
Gold – as closely tracked by the SPDR Gold Shares (NYSE:GLD) – has rallied over 60% year-to-date, on track for its strongest performing year since 1979.
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