BofA Global Fund Manager Survey: Risk Appetite Rebounds Sharply, but a Sell Signal Is Approaching

Overview

This edition of the BofA Global Fund Manager Survey covered May 8 to 14, 2026, with 200 respondents managing a combined $517 billion in assets. The survey shows that global investor sentiment rebounded rapidly from April lows, as lower cash, higher equity allocations, and improving earnings expectations jointly lifted the FMS sentiment indicator to its highest level since February 2026. The report's core conclusion is that risk appetite has turned materially stronger, but positioning and cash indicators are approaching tactically overheated territory.

Core views

The report argues that markets have entered a 'risk-on' phase: investors sharply increased allocations to equities, technology, banks, industrials, and commodities, while reducing allocations to cash, bonds, UK equities, and Eurozone equities. On the macro side, hard-landing fears have declined and earnings expectations have improved sharply, making soft-landing and no-landing the dominant scenarios. However, the report also stresses that renewed inflation, rising long-end US Treasury yields, crowded semiconductor positioning, and shadow banking and AI hyperscaler-related credit risks are the key vulnerabilities in current bullish positioning.

Analysis framework

The report is based on the monthly questionnaire results of the BofA Global Fund Manager Survey, combining cash levels, equity allocations, growth and earnings expectations, tail risks, crowded trades, and changes in regional and sector positioning to form views on global risk appetite, asset rotation, and tactical timing.

Methodology notes

• Investor sentiment surveyBofA Global Fund Manager Survey

  Measures cash, equities, growth, earnings, risk, and allocation preferences through fund manager questionnaires

  This survey included 200 respondents with $517 billion in AUM; among them, 170 answered the global FMS questions and 92 answered the regional FMS questions.

• Tactical timing ruleFMS Cash Rule

  A cash level of 4.0% or below triggers a sell signal

  This period's FMS cash level fell from 4.3% to 3.9%, and the report notes that historically, after this signal is triggered, the median 4-week return for global equities is -1%.

• Market sentiment indicatorBofA Bull & Bear Indicator

  Used to gauge market risk appetite and overheating

  The indicator rose to 7.8 this period, approaching the sell-signal zone, leading the report to suggest that early June may be an appropriate time to take profits.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Global equities

  Core beneficiary asset

  Strengths

  Equity allocation surged to a net 50% overweight, earnings expectations shifted from deterioration to improvement, and hard-landing expectations fell to 4%.

  Weaknesses

  The cash sell signal and sentiment indicators are approaching overheating, increasing short-term profit-taking risk.

  Comparison

  Clearly more favored than bonds and cash.

  Risks

  Rising long-end yields, second-wave inflation, and crowded positioning may pressure valuations.

• Bonds

  Underweighted asset

  Strengths

  If the economy weakens again or yields fall back, short-covering in bonds could drive a rebound.

  Weaknesses

  FMS bond allocation fell to a net 44% underweight, and 62% believe the 30-year US Treasury yield could rise above 6%.

  Comparison

  Significantly less favored than equities and commodities.

  Risks

  A Fed behind the curve, sticky inflation, and long-end supply pressure may continue to push yields higher.

• Cash

  Sentiment and timing indicator

  Strengths

  The decline in cash indicates a recovery in investor risk appetite.

  Weaknesses

  Cash levels fell to 3.9%, reaching the FMS cash-rule sell-signal range.

  Comparison

  Clearly reduced relative to equity allocations.

  Risks

  Low cash means a thinner defensive buffer, which could amplify forced de-risking pressure during market pullbacks.

• Global semiconductors / technology

  Most crowded long exposure

  Strengths

  Technology is at a net 33% overweight, and 73% of respondents identified long global semiconductors as the most crowded trade, showing extremely strong consensus positioning.

  Weaknesses

  Consensus is overly concentrated, raising the risk of contrarian reversals and profit-taking.

  Comparison

  More prominent than other crowded trades such as the Magnificent 7 and oil.

  Risks

  AI capex, valuation pullbacks, earnings disappointments, or spillover from credit risks could trigger volatility.

• Commodities / oil / gold

  Assets linked to inflation and geopolitical risk

  Strengths

  Commodity allocation rose to a net 31% overweight, and the oil price expectation is $85/barrel by end-2026.

  Weaknesses

  A net 46% believe oil is overvalued, and a net 16% believe gold is overvalued.

  Comparison

  Commodities are more popular than bonds and cash, but valuation is more disputed.

  Risks

  Easing Strait of Hormuz risks, weaker-than-expected demand, or crowded-position adjustments could weigh on prices.

• Regional equities

  Diverging regional rotation

  Strengths

  Emerging market equities are at a net 48% overweight, while US equity allocation is above its long-term average.

  Weaknesses

  The Eurozone shifted to a net 4% underweight, Japan to a net 13% underweight, and the UK to a net 26% underweight.

  Comparison

  Emerging markets are more preferred than the Eurozone, Japan, and the UK.

  Risks

  Dollar valuation, regional policy, growth differentials, and a pullback in global risk appetite could affect the persistence of rotation.

Key data

• Survey sample200 respondents, with combined AUM of $517 billionThe survey period was May 8 to 14, 2026; 170 respondents answered the global FMS questions and 92 answered the regional FMS questions.
• FMS sentiment indicatorrose from 3.7 to 6.6Reached the highest level since February 2026.
• Cash levelfell from 4.3% to 3.9%A cash level of 4.0% or below triggers the FMS cash sell signal.
• Equity allocationrose from a net 13% overweight to a net 50% overweightThe highest since January 2022 and a record monthly increase.
• Global growth expectationsnet -14%A clear improvement from net -36% last month, though still negative overall; only 4% expect a hard landing.
• Profit expectationsnet 17% expect global profits to improveLast month, net 14% expected profits to deteriorate; this period marks the sixth-largest monthly improvement on record.
• Biggest tail risk40% chose 'second-wave inflation'Up significantly from 26% last month; geopolitical conflict was 20%, down from 44% in April.
• Most crowded trade73% chose 'long global semiconductors'Next were long Magnificent 7 at 14% and long oil at 6%.
• 30-year US Treasury yield expectations62% believe it could rise above 6%Only 20% think it could fall below 4%, indicating rising long-end yields are the main risk for bulls.
• Source of a systemic credit event42% chose US shadow banking / private creditAI hyperscaler-related risks were also cited as an important source, at 34%.
• Oil price expectation$85/barrel by end-2026Weighted average expectation of respondents; net 46% believe oil is overvalued, the highest since August 2008.
• Sector allocationTechnology net 33% overweight, banks net 19% overweight, industrials net 18% overweightConsumer staples net 28% underweight and consumer discretionary net 18% underweight, indicating a bias toward cyclicals and technology.

Impact & implications

The investment implication of this report is tactical in nature: positioning in risk assets has already recovered rapidly, with equities, technology, and semiconductors benefiting from improving earnings expectations and rebounding risk appetite; however, the cash indicator and Bull & Bear Indicator suggest the market may be entering overheated territory, and if long-end US Treasury yields continue to rise or inflation heats up again, this could trigger a short-term pullback in equities and crowded trades.

Risks

• Second-wave inflation was identified by 40% of respondents as the biggest tail risk, which could push rates higher and compress valuations.
• If the Fed falls behind the inflation curve, long-end US Treasury yields could continue to rise, hurting risk assets.
• Long global semiconductors was identified by 73% of respondents as the most crowded trade, creating the risk of a crowded reversal.
• US shadow banking / private credit was viewed by 42% of respondents as the most likely source of a systemic credit event.
• AI hyperscaler-related credit or capex risks could affect the technology and semiconductor chain.
• Cash levels fell to 3.9%, close to the sell signal, implying insufficient short-term defensive buffer in the market.

What to watch

• Whether the FMS cash level remains below 4.0%.
• Whether the BofA Bull & Bear Indicator moves further into the sell-signal zone.
• Whether the 30-year US Treasury yield approaches or breaks above 6%.
• Whether global CPI and second-wave inflation expectations continue to rise.
• Whether semiconductors and technology positioning sees profit-taking or contrarian rotation.
• Whether credit risks in US shadow banking, private credit, and AI hyperscalers begin to intensify.
• Whether underweight positions in the Eurozone, Japan, and the UK continue to widen within regional allocation.