Investment managers worldwide increased their stock market holdings to an unprecedented level in May, motivated by positive expectations for company earnings and potential Federal Reserve interest rate reductions, a Bank of America monthly survey revealed Tuesday.
Equity markets are currently trading near all-time peaks following a strong earnings period and continued enthusiasm about massive corporate investments in artificial intelligence technology.
This growth persists despite oil prices exceeding $100 per barrel and stalled peace talks between the U.S. and Iran, factors that have negatively impacted global bond markets.
The Bank of America survey questioned 200 participants managing a total of $517 billion in assets between May 8 and May 14.
Half of the fund managers surveyed reported being overweight in equities on a net basis, a significant jump from 13% in the prior month. Cash holdings averaged 3.9%, declining from the previous 4.3%.
Only 4% of respondents anticipated a “hard landing” scenario where economic growth and employment suddenly decline, while 39% predicted “no landing” whatsoever.
Two-thirds of those surveyed expected the Strait of Hormuz shipping disruption to resolve within the coming months.
Forty percent of participants identified a second inflation wave as the most significant downside risk currently facing markets.
Regarding Treasury yields, 62% of respondents set a target of 6% for 30-year bonds, which currently trade around 5.14%, while 20% aimed for a 4% rate.
