BofA poll shows tech overweight hits highest since August 2020

Investing.com -- Global fund managers have the biggest overweight in technology stocks since August 2020, as investors stay optimistic on the macro and market outlook while running low cash levels, according to Bank of America’s October fund manager survey.

The poll, conducted Oct. 2-8, covered 161 participants managing $453 billion in assets. Strategists led by Michael Hartnett said a net 47% of respondents expect above-trend growth and above-trend inflation, the most since February 2022. About six in 10 expect double-digit earnings growth next year, and 76% expect no Fed rate hike at the Oct. 28 meeting.

At the same time, BofA’s broadest sentiment measure, based on cash levels, equity allocation and growth expectations, fell to 6.4 from 7.0. "Growth expectations are slowing, and U.S. equity performance is also moderating," Hartnett wrote. Fifty percent of investors expect "no landing" for the economy, down from 55% in September, while 40% expect a soft landing and 6% a hard landing.

Cash holdings stayed at 3.9% of assets, well below the 4.8% high in the bearish April 2025 survey and still in "sell signal" territory under BofA’s cash rule. Net equity longs slipped to 44% from 49%. Investors made their biggest cut to bank longs since March 2023 and are the most underweight consumer discretionary since July 2008.

Pessimism on bond yields fell to its lowest since May 2025, with a net 1% of respondents expecting higher long-term rates, down from 15% in September. Asked what 10-year Treasury yield would make allocators move from stocks to bonds, 37% said 6% and 14% said 6.5%. Another 19% said they are already shifting.

Long global semiconductors is the most crowded trade, at 45%, followed by short Treasuries at 27%, long Magnificent Seven at 16% and long dollar at 5%.

The biggest tail risks are a disorderly rise in bond yields, at 31%, an AI bubble at 23%, a second inflation wave at 20% and a hyperscaler credit event at 11%, the survey showed. Investors see AI hyperscaler capital spending as the "most likely source of a systemic credit event," at 39%, followed by government debt at 28%.

About 45% of investors expect an AI bubble in 2027, while 32% do not. When asked about cuts to AI capital spending, 57% don’t expect them and 30% do. A drop in oil below $80 a barrel would be the fourth-quarter bull surprise, BofA said, with an AI capex cut the bear surprise.

BofA’s contrarian trades are long bonds, REITs and consumer stocks, and short stocks, tech, banks and emerging markets.

Original Article

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