BofA's July Global Fund Manager Survey says sentiment has turned bullish

NOTE: The July release does not specify the date range when the survey was conducted, and accordingly, it is unlikely to factor in the most recent geopolitical escalations. BofA says that investor sentiment has turned markedly bullish, driven by optimism around a macro "boom", AI capex, and expectations of a dovish Fed. Cash allocations have fallen from 4.1% to what the bank describes as an 'exceptionally low' 3.6%. Its Bull & Bear Indicator has reached an extreme bull reading of 9.4, suggesting investors should reduce equity and high-beta exposure. The survey finds that a record 54% of respondents anticipate a "no landing" scenario; inflation expectations are at their lowest since January 2025, partly reflecting a sharp fall in oil price forecasts from USD 86/bbl to USD 71/bbl during the survey period. 83% believe the Fed will not hike before the US midterms; 44% expect a Democrat House/Republican Senate outcome, with 27% forecasting a Democrat sweep. Long global semiconductors is considered the most crowded trade (82%); 48% view AI hyperscaler capex as the most likely source of a credit event, though 48% do not believe AI stocks are in a bubble, and 61% do not expect a hyperscaler to announce a capex cut. Investors are increasing exposure to US equities, the Eurozone, healthcare, and industrials, while cutting UK, emerging markets, commodities, energy, and staples. Contrarian plays for a hawkish Fed surprise: long staples and gold, short semiconductors and healthcare. For "peak boom": long bonds, UK equities, and high-dividend yielders, short industrials and banks.