Investor Sentiment Reaches 5-Month High as Risk Appetite Surges, BofA Survey Reveals

NEW YORK, NY – July 15, 2025 – Investor sentiment has climbed to its most bullish level since February, driven by escalating profit expectations and a record surge in risk appetite, according to Bank of America's (BofA) July Global Fund Manager Survey. This marks a significant shift in market psychology, with fund managers increasingly embracing risk.

Key Survey Findings:

• Cash Allocations Drop: Cash levels among fund managers fell to 3.9%, the lowest since early 2022. This decline triggered BofA's proprietary "sell signal," historically indicating an overheated market.
• Equity Positioning: Despite the bullish sentiment, equity positioning remains below historical extremes, suggesting there might still be room for further upside before reaching peak euphoria.
• Bond Market Stability: Bond market volatility continues to be muted, providing a stable backdrop for risk-taking in equities.

Greed Replaces Caution

BofA's survey highlights a profound shift from caution to optimism. Optimism regarding corporate earnings has reached a five-year high, reflecting a widespread belief that markets are entering a sustainable growth phase. The report noted, "Sentiment is toppy, but not euphoric. Greed is harder to reverse than fear."

This "greed" is manifesting as a rotation into riskier assets. Fund managers are actively reallocating capital, favoring cyclical and growth stocks, while defensive sectors lag. This indicates a tactical approach to market participation rather than a broad abandonment of risk.

Macroeconomic Context Underpinning Optimism

The renewed investor confidence is supported by several positive macroeconomic indicators:

• Resilient U.S. Equity Markets: U.S. stock markets are nearing all-time highs, demonstrating robust performance.
• Improving Global PMI Data: Purchasing Managers' Index (PMI) data globally shows signs of improvement, signaling expanding economic activity.
• Low Government Bond Volatility: Continued low volatility in government bonds provides a stable financial environment, encouraging investment in higher-risk assets.

For detailed valuation levels, sentiment ratios, and sector exposures, investors can refer to fundamental market metrics. Access to trailing twelve-month valuation, profitability, and liquidity ratios for major indices and sectors can provide deeper insights into market dynamics.

What's Next for Investors?

While the significant drop in cash allocations signals a rising tolerance for risk, BofA cautions that potential market corrections could emerge from unexpected macroeconomic surprises or disappointing earnings reports. For the immediate future, fund managers appear to be prioritizing tactical sector plays over a broad risk-off positioning, indicating a nuanced approach to navigating the current bullish environment. This suggests that while overall sentiment is high, managers are still selective in their exposures.