BofA May Global Fund Manager Survey: Risk appetite rebounds sharply, semiconductors become the most crowded trade
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BofA May Global Fund Manager Survey: Risk appetite rebounds sharply, semiconductors become the most crowded trade
The May FMS shows investors aggressively adding to equities, cutting cash, and upgrading earnings expectations, but inflation, long-term rates, and the crowded semiconductor long trade are pushing markets into a tactically fragile zone.
- Equity allocations jumped from a net 13% overweight to a net 50% overweight, the highest since January 2022 and a record monthly increase.
- Cash levels fell from 4.3% to 3.9%, entering the sell-signal zone of the FMS cash rule at 4.0% or below.
- 73% of respondents said being long global semiconductors was the most crowded trade, far above the 14% who chose being long the Magnificent 7.
- 40% of respondents named a second wave of inflation as the biggest tail risk, with global CPI expectations still elevated.
- 62% of respondents think the 30-year U.S. Treasury yield could rise above 6% if yields swing sharply over the next 12 months.
Report interpretation
Overview
Bank of America released its May Global Fund Manager Survey on 2026-05-19. The survey period ran from 2026-05-08 to 2026-05-14. The 200 participants managed a combined $517 billion in assets, with 170 participants answering the global FMS questions and 92 answering the regional FMS questions. The key message of the report is that global investor sentiment has improved sharply, with equity allocations and earnings expectations rising significantly and cash and bond allocations declining, while crowded positioning, inflation, and upside long-rate risks are increasing market fragility.
Core views
The report argues that the market has quickly shifted from prior pessimism to risk appetite: global growth pessimism has eased, with only 4% of investors expecting a hard landing; earnings expectations have seen a historically large monthly improvement; and capital allocation is clearly tilted toward equities, technology, banks, industrials, and commodities, while cash, bonds, U.K. equities, and Eurozone equities are being cut. At the same time, the BofA Bull & Bear Indicator rose to 7.8, and cash fell below the roughly 4.0% sell-signal threshold, indicating that the market is vulnerable to profit-taking in early June.
Analysis framework
The report is based on the monthly questionnaire results of the BofA Global Fund Manager Survey. It tracks investors' net overweight or net underweight positions across macro, rates, inflation, tail risk, crowded trades, asset classes, regions, and sectors, and combines historical percentiles, standard deviations, cash rules, and the Bull & Bear Indicator to assess risk appetite and tactical signals.
Methodology notes
Uses global fund manager questionnaires to measure macro expectations, risk appetite, and asset allocation changes.
This survey covered 200 participants managing a combined $517 billion in assets during 2026-05-08 to 2026-05-14, with the main outputs including cash levels, equity allocations, growth expectations, tail risks, and crowded trades.
Measures market sentiment by combining variables such as cash, equity allocation, and growth expectations.
The indicator rose to 7.8 this period, nearing the report's described sell-signal area and suggesting a higher short-term pullback probability for risk assets.
Triggers a sell signal when FMS cash levels are at or below 4.0%.
Cash fell from 4.3% to 3.9% this period, and the report notes that the median 4-week decline in global equities after the 24 cash sell signals since 2011 was -1%.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Global equitiesSignificantly overweighted
- Strengths
- Earnings expectations improved sharply, risk appetite recovered, and equity allocation rose to a net 50% overweight.
- Weaknesses
- Cash levels triggered a sell signal, the Bull & Bear Indicator is near elevated levels, and short-term profit-taking risk is rising.
- Comparison
- Compared with cash and bonds, equities are clearly more favored; this allocation is the highest since January 2022.
- Risks
- Rising long-term rates, a rebound in inflation, and excessively crowded positioning.
- Global semiconductorsMost crowded long trade
- Strengths
- Driven by AI and technology risk appetite, semiconductors have become the market's leading trade.
- Weaknesses
- 73% of respondents view it as the most crowded trade, indicating highly concentrated positioning and expectations.
- Comparison
- Crowdedness is far higher than the 14% for being long the Magnificent 7.
- Risks
- Concerns over AI capex, valuation pullback, and profit-taking from technology/semiconductor positions.
- U.S. TreasuriesSignificantly underweighted with pronounced upside yield risk
- Strengths
- If the economy or risk assets weaken, short covering in bonds could create a contrarian opportunity.
- Weaknesses
- Bond allocation fell to a net 44% underweight, and 62% of investors think the 30-year U.S. Treasury yield could rise to 6% or above.
- Comparison
- Compared with equities and commodities, bonds are clearly being reduced.
- Risks
- The Fed being behind the curve, an inflation rebound, and further rises in long-end yields.
- CashSharply reduced
- Strengths
- The decline in cash shows that investors' risk appetite has strengthened.
- Weaknesses
- Cash fell to 3.9%, entering the FMS cash-rule sell-signal zone.
- Comparison
- Compared with equities and commodities, cash has clearly fallen out of favor.
- Risks
- Insufficient cash buffers amplify positioning fragility during market pullbacks.
- Commodities and crude oilOverweight increasing
- Strengths
- Commodity allocation rose to a net 31% overweight, and oil expectations remained around $85 per barrel.
- Weaknesses
- The report shows a net 46% of investors think oil is overvalued, the highest since August 2008.
- Comparison
- Commodity overweighting is at a historically elevated level, but contrarian trades may prefer to trim longs.
- Risks
- Oil overvaluation, slowing demand, and changes in geopolitical and Strait of Hormuz risks.
- U.S. dollarSeen as overvalued
- Strengths
- It may still be supported by safe-haven demand and rate differentials during risk shocks or rising-rate environments.
- Weaknesses
- A net 50% of investors think the dollar is overvalued.
- Comparison
- The euro is seen as undervalued by a net 8% of investors, while only a net 6% think sterling is overvalued.
- Risks
- Dollar-short trades, concerns over fiscal and monetary credibility, and reversals in crowded dollar positions.
Key data
- Survey participants200 participants; $517 billion in assets under management170 participants answered the global FMS questions, and 92 participants answered the regional FMS questions.
- Cash level3.9%Down from 4.3%; at or below 4.0% triggers the FMS cash-rule sell signal.
- BofA Bull & Bear Indicator7.8Close to the report's sell-signal area.
- Equity allocationNet 50% overweightUp from a net 13% overweight, the highest since January 2022 and a record monthly increase.
- Global growth expectationsNet -14%Improved from net -36% last month, but still negative overall.
- Hard landing expectation4%Only 4% of respondents expect a hard landing for the global economy.
- Biggest tail riskSecond wave of inflation, 40%A sharp increase from 26% last month.
- Most crowded tradeLong global semiconductors, 73%Followed by being long the Magnificent 7 at 14%.
- 30-year U.S. Treasury yield view62% think it could rise above 6%Only 20% think the yield will fall below 4%.
- Technology sector allocationNet 33% overweightUp from a net 14% overweight last month.
- Bond allocationNet 44% underweightFurther down from a net 33% underweight last month.
- Commodity allocationNet 31% overweightUp from a net 20% overweight last month, a historically high level.
Impact & implications
For investors, the survey shows that risk assets now have strong support from both flows and sentiment, especially equities, technology, semiconductors, banks, industrials, and commodities. But rapidly crowded positioning, very low cash, and inflation and rate risks mean short-term pullback risk is rising. The strategic implication is that cyclicals and technology remain strong, but new chasing should account for crowdedness and long-rate shocks; contrarian trades could focus on adding back bonds, the dollar, U.K. assets, and short consumer equities, while trimming commodity, equity, emerging market, and technology/semiconductor long exposure.
Risks
- A second wave of inflation was cited by 40% of respondents as the biggest tail risk.
- Upward moves in long-term U.S. Treasury yields could pressure risk-asset valuations; 62% of respondents think the 30-year Treasury yield could rise to 6% or above.
- The long trade in global semiconductors is extremely crowded, and any cooling in AI or technology expectations could amplify the drawdown.
- The main systemic credit-event risk comes from U.S. shadow banks or private credit, selected by 42% of respondents.
- Very low cash levels and a Bull & Bear Indicator near sell-signal territory make the market more vulnerable to short-term profit-taking.
- Many investors view oil and the dollar as overvalued, creating valuation and positioning reversal risks in those assets.
What to watch
- Whether risk assets see profit-taking in early June, and whether the size of any pullback is driven by long-term yields.
- Whether the market increasingly believes the Fed is behind the inflation curve, especially if expectations for 2026 rate hikes rise.
- Whether the 30-year U.S. Treasury yield moves toward or above 6%.
- Whether crowding in global semiconductors and the Magnificent 7 continues to rise or begins to ease.
- Whether inflation data validate concerns about a second wave of inflation.
- Whether cash levels remain below 4.0% and whether the BofA Bull & Bear Indicator moves further into sell-signal territory.
- Whether underweights in Eurozone, Japan, and U.K. equities persist, and whether net overweight in emerging market equities expands.