The latest Bank of America Global Fund Manager Survey, conducted from April 4-10, 2025, covering 195 institutional fund managers with $444 billion in assets under management, reveals a highly bearish outlook, marking it as the fifth most bearish survey in the past 25 years.
Macro Outlook
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Economic Pessimism: 82% of fund managers expect a weaker global economy over the next 12 months, with 42% anticipating a recession, the fourth-highest recession expectation in 20 years.
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Inflation Concerns: 57% predict rising global inflation, a significant shift from previous expectations of lower inflation.
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U.S. Exceptionalism Wanes: A net 62% believe the theme of “U.S. exceptionalism” has peaked, with reduced confidence in U.S. economic outperformance.
Sentiment
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Bearish Sentiment: The survey’s broadest sentiment measure, based on cash levels, economic growth expectations, and equity allocations, reflects extreme pessimism, driven by a worsening U.S. economic outlook, though China’s growth outlook slightly improved.
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Bull Crash: Investor sentiment experienced a “bull crash,” with the second-largest monthly rise in macro pessimism since 1994.
Positioning
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Equity Sell-Off: Global investors significantly reduced equity holdings, with a record 40-percentage-point drop in U.S. equity allocation, the largest monthly decline on record. A record number of investors plan to cut U.S. stock exposure further.
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Cash and Bonds Increase: Cash levels rose sharply to 4.1% from 3.5% in February, the highest since 2010, and bond allocations increased, reflecting a flight to safety.
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Regional Shifts: Eurozone stocks saw increased allocations (net 39% overweight, up from 12% in February), as did global emerging markets (net 20% overweight). Japanese equities remained slightly underweight, while UK allocations rose to a net 4% overweight.
Biggest Tail Risks
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Trade War: 55% of managers cited a trade war-induced recession as the top tail risk, particularly due to potential tariffs under the new U.S. administration.
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Inflation and Rates: 31% highlighted inflation forcing the Federal Reserve to raise rates, down from 41% in January.
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Other Risks: 13% pointed to an AI bubble, and 10% noted new geopolitical conflicts.
Bank of America Commentary
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The survey notes a sharp shift in investor outlook, with the U.S. economy expected to weaken (net 71% anticipate a downturn) while China’s outlook brightened (net 28% expect strengthening).
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Expectations for Federal Reserve rate cuts increased, with 68% anticipating cuts in 2025, up from 51% in February, though the magnitude of cuts remains debated.
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The bearish sentiment contrasts with earlier 2025 surveys, such as February’s, which showed bullishness at a three-year high and low recession fears.
Given the high level of bearishness and low positioning in US equities, it would take a drastic deterioration in US-China relations to push equity markets further down. The bottom looks in, but a rally would require good news from trade negotiations.