December 2025 Bank of America Global Fund Manager Survey

The December Bank of America Global Fund Manager Survey points to a marked strengthening in investor optimism, with sentiment reaching levels not seen since mid-2021 and positioning becoming increasingly aggressive across risk assets. Overall investor sentiment rose to 7.4 (from 6.4 in November) on a 0–10 scale, the highest reading since July 2021, driven by a sharp improvement in growth expectations, lower cash balances, and heavier equity allocations. This level of optimism has been observed only a handful of times since 2000 and historically coincides with late-cycle or “run-it-hot” phases rather than early recoveries.

This renewed macro optimism is reinforced by a dominant belief in a benign economic outcome. A net 18% of respondents now expect stronger global growth over the next year, the most optimistic reading since August 2021, up sharply from a net 3% in November and a stark contrast to April, when a record net 82% expected weaker growth.

Consistent with this backdrop, 57% of investors expect a soft landing for the global economy and 37% expect “no landing,” while only 3% anticipate a hard landing, the lowest share in roughly two and a half years. This distribution reflects a widespread conviction that growth can remain resilient even if policy rates remain restrictive.

Profit expectations reinforce this optimism: a net 29% of managers expect global profits to improve, also the highest since August 2021.

Liquidity conditions are viewed as exceptionally supportive, with a net 61% rating market liquidity as positive, the best reading since September 2021.

Inflation expectations stabilized but remain finely balanced. A net 2% of investors now expect global CPI to be higher in 12 months, reversing November’s net expectation of a similar magnitude for lower inflation, but still far below the inflation fears seen earlier in the year.

Notably, the survey’s optimism is not purely disinflation-driven; rates risk is rising alongside growth confidence. Bond market expectations hardened meaningfully. A net 38% of fund managers now expect long-term bond yields to be higher over the next 12 months, the strongest reading since April 2022. The rise in yield expectations aligns with stronger growth and profit optimism, but it also reflects concerns that easier financial conditions and expanding fiscal deficits could keep term premia elevated even without renewed inflation pressure.

Asset allocation data underline an aggressive “risk-on” stance. Cash levels fell to a record low of 3.3% of assets under management, down from 3.7% in November and 3.8% in October. Historically, cash levels below 3.6% have been followed by an average one-month decline of around 2% in global equities, underscoring how fully invested managers have become and how little “dry powder” remains if sentiment reverses.

Equity positioning strengthened further, with a net 42% overweight in global equities in December, up from 34% in November. Combined exposure to equities and commodities is now at its highest level since February 2022, diverging sharply from still-soft manufacturing data and implying confidence in a coming cyclical re-acceleration.

Regional allocations shifted meaningfully toward developed markets. Allocation to U.S. equities flipped from a net 6% underweight in November to a net 6% overweight in December, while eurozone equities rose to a net 18% overweight, up from 9% in November. Emerging markets remained heavily favored at a net 39% overweight, though slightly below October’s peak, while Japan stayed modestly underweight and the U.K., despite some improvement, remained deeply underweight at a net 24%.

Despite the overwhelmingly bullish tone, the survey highlights persistent concerns around concentration and valuation risks. An “AI bubble” remains the dominant tail risk, cited by 38% of respondents, down from 45% in November but still the most significant perceived threat. Other key risks include a disorderly rise in bond yields at 19% and inflation at 17%, while private credit has emerged as a notable new concern.

These risk perceptions are closely linked to crowded positioning, where “Long Magnificent 7” remains the most crowded trade for the second consecutive month at 54%, followed by “Long Gold” at 29%. Such concentration highlights the potential vulnerability of markets to abrupt shifts in sentiment, particularly if growth or earnings expectations fail to materialize.

At the same time, concerns about excessive capital expenditure have eased slightly. While a net 14% of respondents still believe companies are overinvesting, particularly in AI-related infrastructure, this is down from a record 20% in the previous month.

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