BofA Survey: Investor Sentiment Turns Most Bearish in 10 Months as Growth Outlook Deteriorates

Investor sentiment has deteriorated sharply, with fund managers turning the most bearish in nearly a year, according to the latest Global Fund Manager Survey by Bank of America. The shift reflects growing concerns over global growth, even as markets begin positioning for a post-conflict recovery scenario.

Sharp Turn in Growth Expectations

The survey, conducted between April 3–9 among fund managers overseeing $341 billion in assets, shows a decisive shift in sentiment:

• A net 36% of investors now expect the global economy to weaken
• This marks a dramatic reversal from a net 7% expecting growth just weeks earlier

The change underscores how geopolitical tensions—particularly the U.S.-Iran conflict—have reshaped macro expectations.

Equity Allocations Cut as Risk Appetite Falls

Global equity positioning has been reduced significantly:

• Net overweight allocations dropped to 13%, down from 37% in February

This decline reflects a broader retreat from risk assets as uncertainty increases.

Central Bank Expectations: Fed to Cut, ECB to Tighten

Investors are increasingly aligned around diverging central bank paths:

• 58% expect the Federal Reserve to cut rates
• 46% believe the European Central Bank may hike rates over the next 12 months

More broadly, respondents believe that global interest rates have likely peaked, with limited scope for further tightening.

Dollar Outlook Weakens Despite Short-Term Support

While the U.S. dollar saw short-term demand amid geopolitical tensions, investors remain cautious:

• Most respondents expect the dollar to weaken over time
• Growth concerns are outweighing inflation fears

More than half of participants also cited:

• Loose monetary policy
• Risks to central bank independence

as potential drivers of further dollar weakness.

“Long Rates” Trade Emerges as Top Conviction for 2026

The survey highlights a growing consensus around falling bond yields:

• The most crowded trade for 2026 is “long rates” (bets on declining yields)
• Positioning is particularly strong at the short end of yield curves

This reflects expectations of slowing growth and eventual monetary easing.

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Oil and Gold Outlook Diverge

Energy and precious metals expectations show contrasting trends:

• 34% of investors expect oil at $80–90 per barrel by end-2026
• In the near term, oil is expected to stabilize in the $90–99 range

Gold sentiment remains bullish:

• Most respondents forecast prices returning to the $5,000–$5,500 range

Geopolitics Remain Key Market Driver

The U.S.-Iran conflict continues to shape investor positioning:

• Many expect the war to end as early as April
• However, fewer than one-third foresee a full normalization of shipping through the Strait of Hormuz by mid-year

Meanwhile, expectations for a resolution to the Russia-Ukraine War remain low, with most investors anticipating a prolonged conflict.

Markets Positioning for Post-War Scenario

Despite current uncertainty, markets appear to be pricing in a potential normalization scenario:

• Lower oil prices if the Strait of Hormuz reopens
• Stronger equities as growth expectations recover

However, this outlook remains highly contingent on geopolitical developments.

Conclusion: Fragile Sentiment, Conditional Optimism

The BofA survey suggests a market caught between short-term caution and medium-term optimism:

• Investors are defensive in the near term
• But increasingly positioning for a recovery once geopolitical risks ease

Until clearer catalysts emerge, markets are likely to remain volatile and highly sensitive to headlines.