Bank of America’s August survey of global fund managers reveals that a trade war triggering a global recession remains the top ‘tail risk’, cited by 29 per cent of respondents, down from 38 per cent in July. However, concern is spreading across multiple areas, with 27 per cent believing that inflation prevents Federal Reserve rate cuts, up from 20 per cent the previous month. Additionally, 20 per cent cited a disorderly rise in bond yields as a major risk, a significant increase from 11 per cent in July.
Other concerns include an AI equity bubble, identified by 14 per cent of fund managers, and US dollar debasement, flagged by 6 per cent. The survey also highlighted ‘long magnificent seven’ as the most crowded trade, according to 45 per cent of investors. The ‘short US dollar’ position, previously the most crowded trade in July, dropped to second place with 23 per cent of investors holding that view.
The United States is considered the most overvalued equity region by a record net 91 per cent of fund managers, climbing from 87 per cent in July. Views on the AI sector are diverging, with 52 per cent of investors stating that AI stocks are not in a bubble, while 41 per cent believe they are, reflecting a slight shift in sentiment from the previous month. Bank of America is a global financial institution providing a range of banking, investment, asset management, and other financial and risk management products and services to individuals, small- and middle-market businesses, and large corporations.
