Global fund managers raised their exposure to equities by a record amount in May, according to results of a Bank of America monthly survey published on May 19. Respondents pointed to a combination of improved earnings dynamics and the prospect of interest-rate cuts from the Federal Reserve as the principal forces underpinning the shift into stocks.
Stock markets are trading close to record highs, the survey noted, following a robust corporate earnings season and persistent optimism about substantial corporate investment in artificial intelligence. That bullish stance among equity allocators comes even as oil prices exceed $100 a barrel and peace negotiations between the U.S. and Iran remain at a stalemate - developments that have weighed on global bond markets.
The survey was conducted between May 8 and May 14 and polled 200 respondents with a combined $517 billion in assets under management. It recorded a net 50% of fund managers saying they were overweight equities in May, up from 13% in the prior month. At the same time, average cash holdings declined to 3.9% from 4.3%.
On economic outlooks, only 4% of respondents said they expected a "hard landing" - a scenario marked by a sharp contraction in growth and jobs - while 39% said they expected "no landing" at all. The survey also captured views on the regional and market risks managers see as most pertinent.
Sixty-six percent of respondents said they expected the bottleneck in the Strait of Hormuz to ease within the next few months. When asked about the primary tail risk facing markets now, 40% of respondents identified a second wave of inflation as the greatest concern.
The survey further asked about yield expectations for long-term U.S. government debt. Sixty-two percent of managers said they targeted a 30-year Treasury yield of 6%, while 20% targeted a 4% level. At the time of the survey, 30-year Treasury yields were around 5.14%.
This set of responses illustrates a market positioning that favors equities - particularly in the context of better-than-expected earnings and AI-related corporate spending - against a background of elevated oil prices and unresolved geopolitical negotiations that have pressured bonds.