Key Facts
• US stocks surged since April lows but are seen as overvalued by most fund managers.
• 91% of respondents believe US stocks are overvalued, the highest since 2001.
• Global equity allocation reached its highest level since February, but US stocks remain underweighted by 16%.
• Investor sentiment is the most bullish in six months, with hard landing probability at its lowest since January.
• Survey conducted from July 31 to August 7, covering 169 fund managers managing $413 billion.
• Global economic outlook for the next 12 months:
– Soft landing: 68%
– No landing: 22%
– Hard landing: 5%
• Emerging market stocks are seen as undervalued by 49%, the highest since February 2024.
• Inflation expectations: 18% net expect global CPI to rise, a three-month high.
• Top tail risks:
– Global recession from trade wars: 29%
– Inflation hindering US rate cuts: 27%
– Disorderly bond yield rise: 20%
– AI stock bubble: 14%
– Dollar depreciation: 6%
• Overheated trades:
– Long positions in “Magnificent Seven” stocks: 45%
– Short positions in the dollar: 23%
– Long positions in gold: 12%
Summary
A Bank of America (BofA) survey reveals that 91% of fund managers view US stocks as overvalued, the highest level since 2001. Despite a surge in global equity allocation, US stocks remain underweighted by 16%. Investor sentiment is at its most optimistic in six months, with the probability of a hard landing at its lowest since January. The survey, conducted from July 31 to August 7, involved 169 fund managers overseeing $413 billion in assets. Key findings include a 68% likelihood of a soft landing for the global economy, rising inflation expectations, and emerging market stocks being seen as undervalued. Major risks identified include trade war-induced recessions and inflation obstructing US rate cuts. Overheated trades focus on the “Magnificent Seven” stocks, dollar shorts, and gold longs.
