BofA Fund Manager Survey Shows Bullish Sentiment Peak Amid Market Risks

On December 20, 2025, Bank of America’s December 2025 Global Fund Manager Survey was published on Seeking Alpha [3], revealing investor sentiment at its highest level since July 2021. The survey, polling 238 fund managers managing $364 billion in assets, highlighted key market dynamics: cash allocations dropped to a record low of 3.3%—the lowest since tracking began in 1999 [2][3], while stock and commodity allocations rose to their highest level since February 2022 [1][2]. BofA’s Bull & Bear Indicator stood at 7.9, just below the 8.0 threshold historically interpreted as a sell signal [3]. Macro growth and profit expectations surged to their highest levels since August 2021, driven by the “run-it-hot” trade narrative (strong growth, fiscal stimulus, higher inflation tolerance) [1].

In market reactions, US indices posted gains pre- and post-survey:

• December 19, 2025 (pre-publication): S&P 500 (+0.62%), NASDAQ (+0.80%), Dow Jones (+0.33%) [0]
• December 22, 2025 (post-publication): S&P 500 (+0.19%), NASDAQ (+0.52%), Dow Jones (+0.31%) [0]
• December 23, 2025: S&P 500 (+0.54%), NASDAQ (+0.66%), Dow Jones (+0.25%) [0]

Sector and stock performance aligned with survey trends:

• Technology sector: +1.01% gain, reflecting a crowded “Magnificent 7” trade [0][2]
• NVIDIA (NVDA): +2.45% (Dec 19) and +3.41% (Dec 23) [0]
• Utilities sector: +1.48% (defensive positioning amid vulnerability) [0]
• Energy sector: -1.62% (inflation/growth concerns) [0]

1. Limited Short-Term Buying Power
   : Record-low cash allocations (3.3%) suggest most investor capital is already deployed, potentially restricting further upward momentum despite bullish sentiment [2][3].
2. Overvaluation Warning
   : The Bull & Bear Indicator (7.9) near the 8.0 sell threshold contrasts with recent gains, signaling potential overbought conditions that could precede corrections [3][0].
3. Sentiment Disconnect
   : Institutional bullishness (peak survey sentiment) conflicts with multi-year low consumer sentiment (University of Michigan Index: 52.9) [4], a potential contrarian signal for market stability.

• Overbought Conditions
  : The Bull & Bear Indicator near 8.0 and record-low cash levels increase correction risk [3][2].
• AI Bubble Vulnerability
  : The crowded Magnificent 7 trade and AI bubble tail risk could trigger sharp declines if sentiment shifts [2].
• Consumer Sentiment Drag
  : Weak consumer confidence (linked to unemployment/inflation) may undermine growth and earnings [4].
• Policy Uncertainty
  : The “run-it-hot” assumption relies on loose fiscal/monetary policy; shifts could reverse gains [1].

• Defensive Sector Hedge
  : Strong Utilities sector performance (+1.48%) suggests potential in defensive assets amid volatility [0].

This analysis synthesizes the BofA survey findings and market impact. The survey revealed peak sentiment, record-low cash, and elevated risk asset allocations, with the market reacting positively in surrounding days. The Technology sector and NVDA led gains, while Energy underperformed. Decision-makers should monitor overbought conditions, AI bubble risks, the institutional-consumer sentiment disconnect, and policy developments to understand market dynamics.