January 2025 Bank of America Global Fund Manager Survey

The January Bank of America (BofA) Global Fund Manager Survey reveals that investors are bullish on the US dollar and equities but “bearish on everything else,” with global equity allocations standing at a net 41% overweight—down from December's 49% high. A notable trend is the sharp rotation from U.S. stocks to European equities, with allocations to the Eurozone shifting from a net 22% underweight in December to a net 1% overweight. This represents the second-largest monthly increase in Eurozone exposure in 25 years, driven by investor expectations that US President Donald Trump may adopt a softer-than-feared stance on global trade. Meanwhile, U.S. equity allocations declined, falling to a net 19% overweight from December’s record high of 36% overweight.

Investor sentiment, measured by cash levels and equity allocation, dipped to 6.1 from December's 7.0. Cash holdings held steady at 3.9%, triggering a second consecutive "sell" signal under BofA’s Cash Rule, which has historically correlated with weaker equity returns in subsequent months.

Global growth expectations turned negative, with a net 8% of investors predicting weaker global growth in the next 12 months, reversing last month’s optimism.

However, expectations of a "no landing" scenario increased to 38%, while 50% of respondents continue to expect a soft landing, and only 5% predict a hard landing—the lowest level since June.

Inflation expectations rose to their highest level since March 2022, with a net 7% expecting higher CPI levels over the next year, indicating persistent inflation concerns.

As a result, expectations for rate cuts have softened, with a net 59% now expecting lower short-term rates—the lowest level since June 2023. Consequently, bond allocations fell to their lowest level since October 2022.

The survey also highlighted that 79% of respondents expect the Federal Reserve to cut rates in 2025, with 39% forecasting two cuts, while only 2% predict a rate hike.

The potential for China’s economic growth acceleration was identified as the most bullish catalyst for 2025, cited by 38% of respondents, followed by Fed rate cuts (17%) and AI productivity gains (16%).

Meanwhile, inflation-driven rate hikes and trade wars were seen as the top tail risks, at 41% and 28%, respectively.

The "long Magnificent 7" trade remained the most crowded position at 53%, followed by long U.S. dollar positions (27%), with long crypto re-emerging in third place at 13%.

The last time long crypto was the most crowded trade was in June 2021.

Style preferences indicated a rotation back to large-cap and growth stocks from small-cap and value stocks, reversing the previous trend. Net expectations for large-cap stocks to outperform small-cap stocks rose to 14%,

while only 1% expect value stocks to outperform growth stocks—the lowest level since July 2024.

Looking forward, 27% of investors expect U.S. equities to be the best-performing asset class in 2025, followed by global equities at 21% and Bitcoin at 14%.

The Nasdaq is expected to lead equity indexes, with 29% of respondents identifying it as the top performer for 2025, while the Nikkei’s anticipated outperformance rose to 14% from 9% in December.

The U.S. dollar remains the dominant currency pick, with 41% of investors expecting it to outperform, followed by the Japanese yen at 29%.?

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