A striking paradox defines the current investment landscape: global fund managers are exhibiting their highest level of optimism in months, channeling significant capital into technology stocks, even as a record proportion acknowledge that equity markets are overvalued. This dynamic, captured in a recent Bank of America (BofA) survey, underscores a prevailing risk appetite driven by specific macroeconomic outlooks rather than concerns over market froth.
The September BofA survey, which polled 165 asset managers overseeing $426 billion in assets from September 5-11, revealed that investor optimism reached its highest point since February 2025. The fund manager sentiment index climbed to 5.4 in September, up from 4.5 in August, marking its highest reading year-to-date. A notable 28% of respondents are now overweight global equities, a 14 percentage-point increase from the prior month, signaling a decisive shift towards risk assets. The technology sector, in particular, has seen a surge in conviction, with 20% of investors overweighting tech stocks, the highest level recorded since July 2024.
Despite this bullish positioning, a record 58% of surveyed investors believe global equity markets are overvalued, a slight increase from 57% in August. This contrasts sharply with bond markets, where only 10% of investors perceive overvaluation. Crucially, this widespread acknowledgement of stretched valuations is not deterring investors; market overvaluation does not rank among their top concerns, indicating a willingness to overlook conventional warning signs in pursuit of growth.
Key Risks and Economic Outlook
Instead, fund managers are primarily concerned with macroeconomic factors. The most significant “tail risks” identified were a second wave of inflation, cited by 26% of respondents, followed closely by a loss of central bank independence and a potential weakening of the U.S. dollar, at 24%. Interestingly, anxieties surrounding trade wars, which troubled 29% of respondents in August, have significantly abated, falling to just 12% in the latest survey.
Further insights from the survey highlight a pronounced increase in risk appetite. Cash allocations within portfolios have fallen to 3.9%, marking a one-year low. Investors identified long positions in the “Magnificent Seven” technology stocks and gold as the most “crowded trades.” On the economic front, the consensus favors a “soft landing” for the U.S. economy, with a recession deemed unlikely by most respondents. Reinforcing this optimistic outlook, 47% of participants anticipate at least four interest rate cuts by the Federal Reserve within the next 12 months.
These findings align with trends observed in earlier BofA surveys. A May report indicated a 19-year peak in investor pessimism regarding the dollar, while expectations for a “soft landing” gained traction following diplomatic engagements. Similarly, a July survey noted the highest return to risk assets in 23 years, with a strong focus on technology and U.S. and E.U. equities, underpinned by growing optimism for global economic expansion.
Sophia Patel brings deep expertise in portfolio management and risk assessment. With a Master’s in Finance, she writes practical guides and in-depth analyses to help investors build and protect their wealth.