There are some major red flags in the Bank of America fund manager survey

The recent Bank of America fund manager survey indicates alarming signs for long-term stock investments, revealing that cash allocation stands at a historic low of 3.3%, significantly below the 4% sell signal threshold. Historically, when cash levels drop below 3.5%, the MSCI ACWI tends to experience a monthly decline of -2%. Investor sentiment is at its strongest since July 2021, a period that preceded a market peak followed by a severe bear market in 2022. There is a clear risk where market expectations are so high that even a minor disappointment could sharply impact investor confidence. Allocations to stocks and commodities have risen to levels not seen since early 2022, with current buying allocations reaching the highest since December 2024. The survey highlights that 69% of managers anticipate Hassett as the next Fed chair, and a soft landing is supported by 57%, indicating that overall, the market may be overly optimistic and exposed to downside risks.