Bank of America’s latest survey: A record proportion of fund managers believe U.S. stocks are "too expensive"!

According to the latest monthly fund manager survey released by Bank of America, as U.S. stocks have rebounded significantly since their low in April, the proportion of investors who believe U.S. stock valuations are too high has reached a record high.

Data shows that about 91% of respondents believe current U.S. stock valuations are high, marking the highest level since 2001. Although the allocation ratio of investors to global stock markets has risen to its highest level since February, the survey indicates that 16% of investors still underweight U.S. stocks.

Currently, overall market sentiment has improved to the most optimistic level in six months, even surpassing the levels before U.S. President Trump's tariffs triggered market turmoil and heightened recession fears. Bank of America strategist Michael Hartnett pointed out that investor expectations for a hard landing in the economy have dropped to the lowest level since January of this year.

Driven by better-than-expected corporate earnings and optimistic expectations that the Federal Reserve will cut interest rates amid an economic slowdown, U.S. stocks have recently hit new highs. Analysts from institutions like Citigroup have accordingly raised their expectations for the S&P 500 index's performance in the second half of the year.

Nevertheless, strategists, including Hartnett, warn that the current rally may be overheating and forming a bubble in the context of potential simultaneous easing of monetary policy and financial regulation. Bank of America's August survey shows that the proportion of cash in total assets remains at 3.9%, a level that typically signals a sell-off in the stock market.

This survey, conducted from July 31 to August 7, covered 169 institutional investors managing $413 billion in assets. Other key findings include:

About 68% of respondents believe that the global economy is most likely to achieve a soft landing in the next 12 months, 22% believe the economy will remain stable, and only 5% predict a hard landing;

A net 49% of respondents believe emerging market stocks are undervalued, the highest proportion since February 2024;

Inflation expectations have risen to a three-month high, with a net 18% of respondents expecting global CPI to rise;

Major tail risks: trade wars triggering a global recession (29%), inflation hindering the Fed's rate cuts (27%), disorderly rise in bond yields (20%), artificial intelligence (AI) stock bubble (14%), dollar depreciation (6%);

Most crowded trades: long "U.S. tech giants" (45%), short the dollar (23%), long gold (12%)