Bank of America survey shows fading exuberance around risk assets

The bull case for stocks just got a little quieter. Bank of America’s September Global Fund Manager Survey shows that net enthusiasm for global equities slipped to 49% overweight, down from 56% the month prior, as rising bond yields moved to the top of the worry list for institutional money managers.

The survey pulled responses from 170 fund managers overseeing a combined $470 billion in assets between September 4 and 10, making it one of the more reliable snapshots of how professional capital is actually positioned versus how confidently people speak on television.

Bonds are the new boogeyman

For months, the AI bubble narrative dominated the tail-risk conversation. That concern has now been bumped to second place. A disorderly rise in bond yields was named the single biggest tail risk by 33% of respondents, a meaningful shift in what keeps fund managers staring at their ceilings at night.

The net underweight to bonds in the survey reached 48%, the highest reading since May 2022. Managers are avoiding bonds while simultaneously treating rising yields as their primary fear, which is a bit like refusing to buy an umbrella while complaining about rain.

Cash is up, but not quite screaming ‘buy’

Cash allocations rose to 3.9% of portfolios. BofA strategist Michael Hartnett has a well-known framework here: when cash levels breach 5%, it historically functions as a contrarian buy signal for equities. At 3.9%, the needle is moving toward caution but hasn’t crossed into the territory that triggers that alarm.

Political uncertainty adds another layer

Political uncertainty around US midterm elections is layering on top of the yield concern. The most commonly anticipated outcome, cited by 44% of respondents, is a split Congress. The survey shows that expectations for earnings growth remain broadly positive, and that optimism is arguably the main structural support keeping the equity overweight from falling further.

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