The first lesson from this edition of the Fund Manager Survey is that positioning is fairly bullish, supported by macro fundamentals that are perceived as solid.
Investor sentiment is at its highest level in nine months, with cash levels in portfolios continuing to decline, now standing at just 3.7%.
Source: Bank of America
At the macro level, global growth expectations are positive over a 12-month horizon for the first time in 2025. This is reflected in allocations, with the overweighting of commodities reaching its highest level since September 2022.
Don't give up too soon
But that doesn't stop investors from worrying about a potential AI bubble. For the past two months, they have considered this to be the most significant risk.
Source: Bank of America
The majority of them (53%) believe that AI-related stocks are already in a bubble. And for the first time since 2005, they believe that companies are investing too much.
While the bullish stance and bubble fears seem contradictory, they are actually quite consistent with market movements and the narrative since the beginning of the month. Everyone seems fairly confident about the prospects for AI, although valuations are stretched. Nobody is really worried about growth prospects, but the market is factoring in the fact that Fed rate cuts are less certain.
The current period is often compared with that of the late 1990s. And the question for investors is whether we are in 1998 or late 1999-early 2000. In other words, whether we are at the end of the rally or whether there is still room for further gains.
To date, while everyone is aware of the risks, it is the fear of missing out on the rise, the end of a rally, that seems to prevail.
This is what we explained at the end of September. Between 1999 and its peak in March 2000, the Nasdaq more than doubled. Exiting too early is therefore always a risk.
