Bank of America December Global Fund Manager Survey Released: Cash at Historic Lows + Bull-Bear Indicator at 7.9, Sell Signal Has Been Triggered!

The Bank of America Global Fund Manager Survey December report, released the day before yesterday, has been published for 25 consecutive years and is regarded as Wall Street’s most influential macro sentiment indicator. The report shows that: fund managers’ macro optimism has risen to the highest since August 2021, stock overweights hit a one-year high, but cash levels fell to a historic low of 3.3%—triggering a classic sell signal! The bull-bear indicator soared to 7.9, approaching the 8.0 sell threshold. The AI bubble has been the biggest tail risk for three consecutive months, and the most crowded trade remains long seven giants. Overall signals are somewhat pessimistic: short-term markets are overheated, and the risk of correction is rising.

Macroeconomic and Policy Expectations: Optimism High, but Hassett’s Rise Likely

Fund managers’ outlook on the economy has significantly turned more optimistic:

Managers are extremely confident in a soft landing, with fears of a hard landing almost vanished. But the 69% expectation for Hassett’s rise indicates a more politicized monetary policy, and a low-interest-rate environment may become a reality.

Asset Allocation: Cash at Historic Low, Stocks + Commodities Overweight

This month’s allocation changes are dramatic, with cash levels hitting record lows:

Cash below 4.0% historically triggers a global stock sell signal; the current 3.3% has clearly alarmed. Historically, when cash drops below 3.6%, the next month’s global stock return averages -2%.

Market Risks and Crowded Trades: AI Bubble Continues as Largest Tail Risk for Three Months

Concerns about the AI bubble remain at the top, with record crowding in the seven giants trade—if the narrative shifts, adjustments could be extremely sharp.

Key Investment Signals: Sell Alert Has Been Triggered

• Cash Signal: Below 4.0% triggers a sell on global stocks; the current 3.3% is in a danger zone.
• Bull-Bear Indicator: Rose from 6.6 last month to 7.9, very close to the 8.0 sell threshold (a sign of extreme overheating historically).
• Historical Performance: When cash drops below 3.6%, the following month’s stock market average return is -2%.

The overall tone of the report is pessimistic: managers are extremely optimistic + allocations are extreme → short-term markets are overheated, valuation correction risk is high. Despite strong macro soft landing belief, new lows in cash + high bull-bear indicator levels signal red flags for contrarian signals.

Bank of America’s 25-year history proves: when managers are most optimistic, the market is often at its most dangerous. Everything seems priced in now; a correction may be imminent.

What do you think of this report? Share your thoughts in the comments section~ A. Sell signal is valid, prepare to reduce holdings B. Optimism continues, bull market not over C. Will the AI bubble burst? Danger in the seven giants D. Low cash is a bull market feature, no worries

Take it step by step—when sentiment indicators light up, caution is the best approach!