Investors' risk-on appetite reaches 15-year high

Investors' risk-on appetite reaches 15-year high
BofA survey reveals bullish sentiment.
FEB 18, 2025
By  Bloomberg

by Sagarika Jaisinghani

Global stocks have become the most popular asset class with investors, who are showing the biggest willingness to take risk in 15 years, according to a survey by Bank of America Corp.

Fund managers’ cash levels fell to the lowest since 2010, while 34% of participants said they expect world equities to be the best-performing asset in 2025, the survey showed. A net 11% indicated they were underweight bonds.

Investors are “long stocks, short everything else,” strategist Michael Hartnett wrote in a note. The bullishness was underpinned by expectations of robust economic growth and lower US interest rates this year, he said.

Global equities have rallied over 60% since a low in late 2022 on optimism around artificial intelligence as well as signs that a US recession had been averted. The rally had been driven by a narrow group of US technology stocks, and investors are now flocking into cheaper European equities.

About 89% of respondents in the BofA survey said US equities were overvalued, the most since at least April 2001. The faith in so-called US exceptionalism — where investors bet mainly on American financial markets — has also faltered as investors rotate into European stocks. 

The Euro Stoxx Index is expected to outperform the US technology-heavy Nasdaq 100 this year, the survey showed. The European gauge has already surged 12% in 2025, while the Nasdaq 100 has advanced 5%.

Overall investor bullishness — as a measure of cash levels, equity allocation and global growth expectations — rose to 6.4 from 6.1, although it remains below the “frothy” levels seen in December 2024.

Global recession expectations fell to a three-year low, while about 77% of fund managers expect the Federal Reserve to cut rates in 2025, survey showed.

Other key findings in the poll, which was conducted from Feb. 7 to Feb. 13 and canvassed 168 participants with $401 billion in assets:

  • Macro sentiment on China improved for the first time in four months, likely as an impact from AI startup DeepSeek
  • Accelerating growth in China was seen as the most bullish for risk assets in 2025, followed by productivity gains
    • Participants indicated a global trade war and a disorderly rise in bond yields were the most bearish risks
  • Long Magnificent 7 remains the most crowded trade, followed by long US dollar and long crypto

 

Copyright Bloomberg News

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