By Vicki Schmelzer
NEW YORK (MaceNews) – Global investors maintained a bullish bent in July despite ongoing uncertainty about tariffs, according to BofA Global Research’s monthly fund manager survey, released Tuesday.
A net 31% of those polled this month looked for a weaker global economy in the coming months. This compared to a net 46% looking for weakness in June and a net 59% looking for weakness in May. As background, in April, a net 82% looked for weakness, the “most on record” (30-year history).
Inflation concerns waned further in July, with a net 6% of portfolio managers looking for higher global inflation in the coming 12 months. This is down from a net 13% in June and a net 30% in May.
Cash levels fell to 3.9% in July, breaking below 4.0% and thus “triggering a ‘sell’ signal” for S&P 500 equities, the survey said. Cash levels stood at 4.2% in June and 4.5% in May.
Following 17 such “sell” signals seen since 2011, the median four-week S&P 500 loss has been 2%, the survey said. The “biggest loss recorded post-sell signal” was 29% and the “best gain” was 3%, the survey noted.
Cash allocation stood at a net 6% overweight, compared to a net 16% overweight in June and a net 26% overweight in May.
In terms of asset allocation, global investors continued to dip their toes into riskier instruments.
In July, a net 2% of portfolio managers were overweight global equities, versus a net 2% underweight in June and a net 13% underweight in May. Managers were last overweight equities in March (net 6% overweight).
A net 4% of those polled were underweight bonds, compared to a net 5% underweight in June and a net 1% underweight in May.
Allocation to real estate stood at a net 10% underweight in July versus a net 12% underweight in June and a net 8% underweight in May.
Commodity allocation slipped to a net 5% overweight this month from a net 9% overweight in June and compared to a net 2% overweight in May.
In terms of regional equity allocation this month, U.S and eurozone equities were favored over other regions.
Allocation to U.S. equities held at a net 23% underweight in July, compared to a net 36% underweight in June and a net 38% underweight in May.
This month, a net 41% of those polled were overweight eurozone stocks, a four-year high. This compared to a net 34% overweight in June and a net 35% overweight in May.
Allocation to global emerging markets (GEM) slipped to a net 22% overweight in July from a net 28% overweight in June and compared to a net 11% overweight in May.
This month, allocation to Japanese equities stood at a net 9% underweight versus a net 6% underweight in June, while UK allocation held at a net 3% underweight compared to a net 4% underweight in June.
This month, the three biggest “tail risks” seen by managers were: “Trade war triggers global recession” (38% of those polled), “Inflation prevents Fed rate cuts” (20%), “U.S. dollar slumps on capital flight” (14%).
Last month, the biggest “tail risks” were: “Trade war triggers global recession” (47% of those polled), “Inflation causes Fed to hike” (17%), and “Credit event driven by disorderly rise in bond yields” (16%).
In July, the three “most crowded” trades were seen as “Short U.S. dollar” (34%), “Long Magnificent 7” (26%) and “Long Gold” (25%)
In June, the three “most crowded” trades were “Long Gold” (41% of those polled), “Long Magnificent 7” (23%) and “Short US Dollar” (20%).
Note: the term “Magnificent Seven” was coined by Bank of America’s chief investment strategist Michael Hartnett, referring to a basket of the seven major tech stocks: Apple, Microsoft, Amazon, NVIDIA, Alphabet, Tesla and Meta.
This month, BofA Global asked special questions about U.S. tariff rates, Federal Reserve policy and Fed Chair Jerome Powell’s replacement.
On trade, 53% of managers (weighted average response) expected a final U.S. tariff rate of 14% on “Rest-of World imports”, up from the 12% tariff rate envisioned in June.
Ahead of the July 30 FOMC meeting, 88% of fund managers polled looked for no change in Fed policy, versus 11% looking for a rate cut.
Forty-seven percent of managers expected the Fed to cut two times in 2025, 34% looked for one cut and 10% looked for no change this year. In contrast, 8% saw the Fed cutting 3 times and 1% looked for more than 3 cuts.
“FMS expectations of Fed policy is currently in line with bond market pricing (49bps cut projected by Fed funds futures),” the survey said.
Amidst expectation for President Trump to nominate a new Fed chair in the second half of 2025, BoA Global polled managers about who the nominee might be.
Twenty-six percent of fund managers said current U.S. Treasury Secretary Scott Bessent, 17% said Kevin Warsh, 14% said Christopher Waller and 7% said Kevin Hassett.
An overall total of 211 panelists, with $504 billion in assets under management, participated in the BofA Global Research fund manager survey, taken July 3 to July 10, 2025. “175 participants with $434bn AUM responded to the Global FMS questions and 103 participants with $172bn AUM responded to the Regional FMS questions,” BofA Global said.
Contact this reporter: vicki@macenews.com