By Vicki Schmelzer
NEW YORK (MaceNews) – Global investors dumped bonds in October, despite expectations of future Fed cuts and continued concern about rising inflation, according to Bank of America Global Research’s monthly fund manager survey, released Tuesday.
In October, a net 24% of portfolio managers were underweight bonds, versus a net 3% underweight in September and a net 5% underweight in August. Current bond allocation is “the lowest since Oct’22,” the survey said.
This month, a net 32% of those polled were overweight global equities, up from a net 28% in September and compared to a net 14% in August.
Allocation to real estate stood at a net 12% underweight in October, compared to a net 22% underweight in September and a net 21% underweight in August.
Commodity allocation rose to a net 14% overweight in this month versus a net 8% overweight in September and a net neutral in August.
In terms of the world economy, a net 8% of those polled look for weaker growth in the coming 12 months. This compared to a net 16% looking for weaker growth in September and a net 41% looking for global growth in August. As a reminder, in April, a net 82% of managers looked for weakness, the “most on record” (30-year history)
Inflation concerns expectations were unchanged, with a net 24% looking for higher global CPI in the coming year. A net 18% looked for higher inflation in August.
Fund manager cash levels fell to 3.8% in October, down from 3.9% in September and August. BofA Global noted that the “sell signal” for the FMS cash rule was last triggered in July when cash levels fell from 4.2% to 3.9%. “FMS cash level at or below 3.7% is a hard “sell” signal,” the survey said.
Cash allocation stood at a net 13% underweight this month, compared to a net 4% underweight in September and a net 1% underweight in August. As background, in July cash allocation was a net 6% overweight.
In terms of regional equity allocation, most regions saw inflows or were little changed.
Allocation to U.S. equities flipped to a net 1% overweight in October from a net 14% underweight in September and compared to a net 16% underweight in August.
This month, a net 18% of those polled were overweight eurozone stocks, up from a net 15% overweight in September but down from a net 24% overweight in August.
Allocation to global emerging markets (GEM) rose to a net 46% overweight in October from a net 27% overweight in September and compared to a net 37% overweight in August.
This month, allocation to Japanese equities improved to a net 1% underweight from a net 5% underweight in September, while UK equity allocation was little changed at a net 19% underweight versus a net 20% underweight last month.
In terms of the three biggest “tail risks” seen by managers, in October, there were: “AI equity bubble” (33% of those polled), ” 2nd wave of inflation” (27%), “Fed loses independence and US dollar debasement” (14%).
In September, the top 3 tail risks were “2nd wave of inflation” (26% of those polled), “Fed loses independence and US dollar debasement” (24%) and “Disorderly rise in bond yields” (22%)
In October, the three “most crowded” trades were seen as “Long Gold” (43% of those polled), “Long Magnificent 7” (39%) and “Short US dollar” (8%).
In September, the three “most crowded” trades were “Long Magnificent 7” (42% of those polled), “Long Gold” (25%) and “Short US dollar” (14%)
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.
An overall total of 193 panelists, with $468 billion in assets under management, participated in the BofA Global Research fund manager survey, taken October 3 to October 9, 2025. “166 participants with $400bn AUM responded to the Global FMS questions and 95 participants with $198bn AUM responded to the Regional FMS questions,” BofA Global said.
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Contact this reporter: vicki@macenews.com