Fund Managers Most Bullish on 'No Landing' Scenario Since 2022

Investors are more bullish than ever, according to Bank of America's latest global fund manager survey. The survey reveals that investor sentiment has reached its third-highest level since 2022, with a record consensus conviction around a 'no landing' economic scenario, where the economy continues to grow despite elevated interest rates.

Cash levels have plummeted to an extremely low 3.5%, while global equity allocations have surged to a net 56% overweight, the highest since November 2021, signaling extraordinary risk appetite among institutional investors.

This bullish positioning arrives as Federal Reserve Chair Kevin Warsh prepares for his debut speech at the Jackson Hole Economic Policy Symposium, scheduled for August 27-29. Warsh's opaque communication style has created considerable uncertainty, making Jackson Hole an unusually high-stakes event for market participants seeking clarity on the policy outlook.

According to the survey, 72% of fund managers believe no Fed rate hike will occur before the November midterm elections, while only 22% expect one. Money markets currently price in a rate hike by December, though the probability of a September increase has fallen sharply to roughly 34% following weaker-than-expected July employment data.

The bond market, however, is sending a starkly different message from equity investors. The 30-year Treasury yield surged to 5.31% earlier this week, its highest since 2007, even as short-term rate hike expectations have diminished.