Bank of America’s latest survey of fund managers reveals a remarkable surge in optimism as 2025 draws to a close. According to the survey, conducted among 238 fund managers, bullish sentiment is at its highest level in over three years, reflecting an overall belief that the U.S. economy can avert a recession while achieving a soft landing. This upbeat outlook comes amid reassuring macroeconomic conditions that appear to support market stability.
One critical indicator of confidence is the significant decline in cash holdings among these managers, now reported at just 3.3%, a drop from 3.7%. This marks the lowest cash level on record, suggesting a strong commitment from investors to allocate capital into equities rather than holding onto cash reserves. Analyst Michael Harnett noted that the overall sentiment measure, which combines cash levels, equity allocations, and global growth expectations, increased to 7.4 from 6.4, the highest reading since July 2021.
The survey’s findings also highlighted that 57% of fund managers anticipate a cooling in the economy, with only 3% predicting an impending recession—the lowest percentage recorded for this concern. Meanwhile, 37% of respondents do not foresee any economic slowdown at all. Harnett emphasized that global growth expectations have surged to the most optimistic levels since August 2021, with an increase from a net 3% to a net 18%.
When it comes to corporate profits, 29% of fund managers expect an uptick, marking the highest expectation since April 2021. However, the survey also pointed to potential risks, with respondents identifying the possibility of an AI bubble burst or a crash in private credit as significant tail risks for the market. Furthermore, concerns arise regarding the “Magnificent Seven” tech stocks, which have been under heavy scrutiny due to their popularity and market positioning.
Market analysts are suggesting that in 2026, investors should consider seeking opportunities beyond the heavily trafficked AI sector, indicating a shift in strategy in light of the current market dynamics. Overall, the survey reflects a profound sense of optimism and market engagement, pointing to a unique moment in the financial landscape as we approach the new year.
