- Investors remain optimistic about the global economic outlook
- Inflation eases concerns
- The biggest tail risks are second-wave inflation, the AI bubble, and a disorderly rise in bond yields
- Interest rate expectations are now the highest since September 2022
- Global long term semiconductor trade is the busiest trade ever (80%)
- The artificial intelligence sector is still booming (56%), and “euphoria” is on the rise (21%)
- The position of the US dollar turned neutral
- Gold is seen as having fair value for the first time since February 2024
- Spain are seen as favorites to win the 2026 FIFA World Cup
Bank of America’s Global Fund Managers Survey (FMS) is one of the most influential monthly reports in the financial world. He surveys approximately 200 to 400 institutional fund managers (people who manage hundreds of billions of dollars in hedge funds, pension funds, and mutual funds) to see how they are faring in the markets.
It is useful as a contrarian indicator. In fact, when concentration becomes too much on one side or the other, the risk of a violent pullback increases. Complacency is punishable in the markets. There is generally a trigger that triggers relapses or just multiple factors that indicate an inflection point.
In June, the FMS index showed that investors reduced their risk exposure but remained increasingly optimistic about the global economic outlook. Just 1% of fund managers now expect weaker global growth over the next 12 months, a sharp improvement from 14% in May and 36% in April, indicating stronger confidence in economic resilience. Concerns about inflation also eased, with 45% expecting inflation to rise, down from 66% in May.
The top risks identified by investors were a second-wave bulge (34%), an AI bubble (28%), and a disorderly rise in bond yields (19%). Interest rate expectations are now the highest since September 2022.
The most crowded trade remained in long-term global semiconductors, with 80% of fund managers holding this view in June, a record high for the survey. This was followed by long technology stocks Magnificent Seven (12%) and long oil (4%).
Regarding AI, most investors believe the sector is still in the “boom” phase (56%), while 21% see “euphoria”, indicating that optimism remains high but bubble fears are on the rise.
Relative to the US dollar, FMS investors were the least underweight (3%) since March 2025, suggesting that the extreme bearish situation has turned neutral. Gold is also seen as having fair value for the first time since February 2024.
For contrarian trades, Bank of America suggests long bonds, European, consumer, and REITs; and short commodities, semiconductors, materials and banks.
The survey also asked who will win the 2026 FIFA World Cup. 22% preferred Spain, 19% France, 8% England, 8% Brazil, 8% Argentina, 6% Portugal, and 3% Germany.
Overall, Bank of America concluded that the survey does not point to a major market top, but rather shows that investors are taking some profits and adopting a more cautious summer stance while remaining broadly optimistic about growth and risk assets.
The risk in my opinion is that the data supports a rate hike by the Fed and the tightening leads to a bad stock market correction and increased recession fears.
