–AI Bubble Still Seen as Biggest Tail Risk
By Vicki Schmelzer
NEW YORK (MaceNews) – Fund managers remained bullish on global growth prospects in August, as per the latest BofA Global Fund Managers survey, released Tuesday.
Nevertheless, market sentiment shifted on the month to favor equities and reduce cash and fixed income and managers tweaked their portfolios accordingly.
This month, a net 14% of those polled looked for stronger economic growth in the coming 12 months. This is down from July when a net 21% looked for stronger growth, but well up from June when a net 1% looked for weaker growth.
Inflations concerns rose on the month, with a net 3% of managers now looking for higher global inflation in the coming year down from a net 4% looking for lower CPI in July. These reading compare to June when a net 45% looked for higher global CPI.
In terms of holdings, fund managers reduced cash and bond holdings, while increasing equity, commodity and real estate holdings.
Cash levels fell to another “uber-low” of 3.5% of assets under management, “the lowest since February 2026 and the sixth lowest in FMS history (since ’98)”. This triggered a “sell signal” on the BofA Global FMS Cash Rule,” which occurs when cash is at or below 4.0%. Cash levels stood at 3.6% in July and at 4.1% in June.
In contrast, cash allocation was a net 2% underweight in August, versus neutral in July and compared to a net 5% overweight in June.
In August, a net 56% of portfolio mangagers were overweight global equities, up from a net 42% in July and a net 38% in June.
A net 39% of managers were underweight bonds this month, compared to a net 34% underweight in July and a net 42% underweight in June.
Allocation to real estate stood at a net 7% underweight in August, versus a net 17% underweight in July and a net 15% underweight in June.
This month, commodity allocation rose to a net 24% overweight from a net 11% overweight in July and was nearly back at the net 25% overweight seen in June.
In terms of regional equities, investors poured monies into all countries except Japan in August.
Allocation to U.S. equities increased to a net 27% overweight from a net 24% overweight in July and remained the highest holdings since December 2024. In June, managers held a 17% overweight.
A net 6% of those polled in August were overweight eurozone stocks, compared to a net 2% overweight in July and to a net 15% underweight in June.
Allocation to global emerging markets (GEM) rose to a net 34% overweight from a net 32% overweight in July. This compared to the net 42% overweight seen in June.
This month, allocation to Japanese equities fell to a net 1% overweight from a net 3% overweight in July, while UK allocation improved to a net 33% underweight from a net 37% underweight.
In terms of the three biggest “tail risks” seen by managers, “AI bubble” (32% of those polled), “Disorderly rise in bond yields” (27%) and “2md wave of inflation” (25%).
In July, these “tail risks” were “AI bubble” (45% of those polled), “2nd wave inflation” (26%), and “Disorderly rise in bond yields” (14%).
In August, fund managers viewed the three “most crowded” trades “Long global semiconductors” (53% of those polled), “Short Japanese yen” (12%), “Long Magnificent 7” (11%).
In July, the three “most crowded” trades were “Long global semiconductors” (82% of those polled – new record), “Long Magnificent 7” (7%) and “Long US dollar” (4%).
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 203 panelists with $581bn in AUM participated in the BofA Global Research fund manager survey, taken August 7 to August 13, 2026.
Contact this reporter: vicki@macenews.comagnificent 7” (7%) and “Long US dollar” (4%). Note: the term “Magnificent Seven” w