Investor sentiment has reached its strongest level since February 2025, according to the latest Bank of America (BofA) Global Fund Manager Survey for October. The report highlights a clear rise in optimism across global markets, even as fund managers warn of potential overheating in the AI sector.
The optimism index among large fund managers climbed to 5.8 points, marking its highest reading since early 2025. BofA’s monthly survey includes participants managing over $468 billion in assets worldwide.
Analysts note that investor confidence has rebounded significantly since the escalation of the U.S.–China trade war, nearing levels last seen during the Trump re-election period. On a month-over-month basis, sentiment rose by 0.5 points, reflecting a steady improvement in risk appetite.
Recession Fears Continue to Fade
Expectations of a U.S. recession have dropped to their lowest point since February 2022 — only 31% of respondents now see a downturn as likely. That’s a sharp decline from April 2025, when 58% of managers considered a recession a major risk.
In parallel, 59% of respondents believe that global markets currently have excess liquidity — the highest reading since September 2021. Meanwhile, 60% view global equities as overvalued, compared to just 22% who say the same about bonds.
“Soft Landing” Becomes the Consensus View
More than half (54%) of surveyed managers expect a soft landing for the global economy — the highest reading in six months. Another 33% predict continued resilience despite high interest rates, while only 8% foresee a “hard landing.”
Cash holdings among fund managers declined slightly from 3.9% to 3.8%, suggesting increased deployment of capital into risk assets. BofA’s Bull & Bear Indicator remains at 6.5, a neutral-to-bullish zone that indicates moderate optimism but not euphoria.
Notably, 45% of participants reported an overweight position in equities, increasing exposure to real estate investment trusts (REITs) and utilities, while trimming positions in government bonds, telecom stocks, and cash.
Gold Trade Overtakes the ‘Magnificent Seven’
According to the survey, long gold has now become the most crowded trade, cited by 43% of respondents — surpassing last month’s favorite position, long on “Magnificent Seven” tech stocks.
The AI sector has emerged as the top perceived risk to the global economy, identified by 33% of fund managers who view it as a potential “bubble.” Concerns over inflation ranked second (27%), followed by fears about Federal Reserve independence (14%).
Only 5% of respondents now consider the U.S.–China trade war a primary risk — a dramatic drop from 80% in April 2025.
