Quick Bites: Global Fund Managers Turn Cautious
The latest edition of the Bank of America (BoA) Global Fund Manager Survey, which polled 171 asset allocators running hundreds of billions of dollars, found investor sentiment had collapsed in recent weeks. The survey’s broadest measure of fund manager sentiment, which is based on their equity allocations, cash levels and global growth expectations, fell to 3.8 in March from 6.4 in February. This marks a seven-month low.
BoA strategists said: “This month’s decline is the largest since March 2020 and the seventh largest in the past 24 years, only surpassed by extreme bear sentiment observed around major market shocks (August 2007, May 2010, August 2011, March 2020).”
Source: Bank of America Research, Global Fund Manager Survey – March 2025
In the past month, there has been a record rotation out of US stocks by global fund managers, after investor sentiment took a sharp hit. Recent weeks have been challenging, with share markets falling after investors were spooked by a weakening US economy, trade war tensions and high valuations. The US market has led the fall, whereas European and Chinese markets have outperformed – reversing trends from the previous few years.
Net % of fund managers overweight US equities
Source: Bank of America
The survey found that the “US exceptionalism” narrative – or the idea that the US is structurally superior in its outperformance compared with other developed countries and which has driven the market’s outperformance for an extended period – is starting to crack. Some 69% of respondents think the US exceptionalism theme has peaked.
This view is reflected in the record rotation out of US stocks seen this month – the allocation dropped 40% to a net underweight of 23% (to the lowest allocation since June 2023).
This had a knock-on effect on the global equity allocation, which fell 29% month-on-month to a net overweight of just 6%, which is the lowest since November 2023 and the fifth largest decline on record.
Fund managers’ average cash levels
Source: Bank of America
BoA strategists said: “Note the rotation from equities was to cash (allocations rose 17% month-on-month to a net 10% overweight), not bonds (allocations fell 3% to a net 13% underweight).”
Fund managers’ average cash levels, shown in the chart above, rose 62 basis points in March. This is the largest one-month increase since December 2021.
Expectations for the global economy – the final component of BoA’s sentiment indicator – also deteriorated this month. The survey recorded the second biggest monthly rise in macro pessimism on record, as 63% of investors expect the global economy to weaken over the coming 12 months.
What fund managers consider to be the biggest tail risk
Source: Bank of America
A recessionary trade war remains the largest tail risk that fund managers are worried about, with 55% citing it in the survey. President Trump has jolted markets out of their complacency by his aggressive tariffs policies.
Under a full-blown trade war scenario, 58% of investors expect gold to be the best performing asset. Some 16% pointed to 30-year treasuries, 9% opted for three-month T-bills, and 6% said commodities.
Meanwhile, inflation causing the US Federal Reserve to hike interest rates is the biggest risk for 19% of fund managers (down from 31% in February and 41% in January) while 13% are worried by the impact on the US economy of the Department of Government Efficiency (DOGE) and its cost-cutting drive.
