Global stocks now the most popular asset class, BofA says
The popularity of US stocks has fallen sharply since December, when fund managers expected them to lead other assets in 2025 were ‘super bullish’.
Fund managers have turned more bullish on European stocks as they seek out better value, while cutting their average cash allocation to the lowest level in 15 years, according to Bank of America.
Global stocks are now the most popular asset class with investors after gaining favour at the expense of US stocks in February. A net 34 per cent of global fund managers surveyed expect global stocks to be the best performing asset class of 2025.
BofA’s February survey of 168 global fund managers with $US401bn ($631bn) of assets under management suggests investor optimism is rising and potentially bullish enough for a pullback.
The next most popular asset class was gold. The net percentage expecting gold to lead other assets in 2025 shot up to 22 per cent. Third was US stocks, where 18 per cent expected them to lead.
The popularity of US stocks has fallen sharply since December, when the net percentage of respondents expecting them to lead other assets in 2025 was a “super bullish” 30 per cent.
About 89 per cent of respondents said US equities were overvalued, the most since at least April 2001, leading BofA to say that US exceptionalism has “peaked”. In the current decade an average of 81 per cent of investors surveyed have consistently viewed US stocks as “overvalued”, BofA said.
Bitcoin ranked as the fourth most popular asset class for 2025, but the percentage of respondents expecting it to lead other assets retreated to a net 10 per cent versus 15 per cent in December.
It came as fund managers’ average cash level fell to 3.5 per cent, the lowest since 2010 and equity investors rotated to bond proxies and European stocks in recent weeks.
The low cash level continued to constitute a “sell” signal, according to BofA’s Fund Manager Survey Cash Rule. BofA’s broadest measure of global fund manager sentiment – based on its survey measures of cash levels, equity allocations and global growth expectations - rose from 6.1 to 6.4 in February, signalling rising investor optimism. However, it remained below the ‘frothy’ level of December 2024 when the market was very optimistic about the outlook under Trump 2.0.
The net percentage of investors that were overweight bonds rose to 11 per cent underweight from 20 per cent underweight a month ago. It was 1.3 standard deviations above the long-term average.
Investors were “long stocks, short everything else” amid expectations of robust economic growth and lower US interest rates this year, said BofA’s chief investment strategist, Michael Hartnett.
Amid optimism around AI, US economic resilience and interest rate cuts, the MSCI All Country World Index soared 65 per cent from a low point in late 2022. The Nasdaq Composite index surged 90 per cent in that time. The US tech benchmark has been primarily driven by a 165 per cent rise in the so-called Magnificent 7 index of US tech giants, of which Nvidia has risen more than nine-fold.
The S&P 500 hit a record high on Tuesday but has been overtaken by European stocks this year.
The EuroStoxx 50 is up 10 per cent year to date versus 4.2 per cent for the S&P 500 and 3.2 per cent for Australia’s S&P/ASX 200. The ASX 200 hit a record high last week but has fallen this week amid profit taking in banks and the Reserve Bank’s “caution” about further interest rate cuts.
“Long Mag 7” remained the “most crowded trade”, ahead of “long US dollar” and “long crypto”.
“The US ‘exceptionalism’ theme has been characterised by a combo of strong US dollar and an equity bull market led by the ‘Magnificent 7’ group of stocks,” Mr Hartnett said.
“In the February survey, ‘long US exceptionalism’, that is ‘long Magnificent 7’ or ‘long US dollar,’ was viewed as the most crowded trade by 73 per cent of surveyed investors, a decline from the three-year high of 80 per cent reached in January.”
Asked which equity index would perform best in 2025, fund managers surveyed saw the EuroStoxx index outperforming the Nasdaq Composite index.
The popularity of Chinese stocks rose to third place, with the Hang Seng expected to be the best stock index according to 18 per cent of investors surveyed, up from 10 per cent in January.
The fourth most popular index was the Russell 2000 small caps index, followed by Japan’s Nikkei.
Investors increased their allocation to the Eurozone, bonds, and defensives including healthcare and consumer staples stocks, and reduced their allocation to tech, equities, and banks.
Their biggest overweights were in stocks, banks, healthcare, and the US versus underweights on the UK, resources including materials and energy, and bonds.
In the foreign exchange market for 2025, fund managers held onto their view that the US dollar will be the best performing currency, albeit down to 31 per cent versus 41 per cent in January.
The Japanese yet was close second at 30 per cent, while gold saw the largest month-on-month jump, up 6 percentage points, as it soared to record highs.
Global recession expectations fell to a three-year low, and about 77 per cent of fund managers expected the Federal Reserve to cut rates in 2025.
Macro sentiment about China improved for the first time in four months, after the launch of DeepSeek AI. Accelerating growth in China was seen as the most bullish possibility for risk assets in 2025, followed by productivity gains.
Participants saw a global trade war and a disorderly rise in bond yields as the most bearish risks.
Originally published as Global stocks now the most popular asset class, BofA says
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