<p>Global market turmoil continues, and Bank of America summarized the changes in various assets in its latest fund survey, including a dramatic reversal in sentiment and extreme underweight positioning in the US dollar...</p>
<p>According to the Wind Trading Desk, Bank of America conducted a survey of 190 investment professionals from June 6 to 12, with total assets under management reaching $523 billion. Bank of America stated in the report that <strong>market sentiment has reversed from the recession panic of April, with investor sentiment returning to &#34;golden-haired girl-style bull market&#34; levels.</strong></p>
<p>The most striking finding of the survey is the extreme aversion of investors to the US dollar. The underweight level of the dollar has reached its highest in 20 years. Shorting the dollar has become the third most crowded trade, accounting for 20%.</p>
<p>The crowded trade leaderboard shows: going long on gold ranks first (41%) but has cooled down, going long on the seven major US tech stocks ranks second (23%), and shorting the dollar ranks third (20%).</p>
<p>Based on the current market sentiment, Bank of America identified three major &#34;contrarian trading&#34; opportunities: going long on the dollar, shorting gold; going long on US stocks, shorting European stocks; going long on consumption, shorting bank stocks.</p>
<p>In the selection of the best assets over the next five years, 54% of respondents bet on international stocks, only 23% chose US stocks, 13% favored gold, and 5% were optimistic about bonds.</p>
<h2>Investor sentiment significantly warms up, cash allocation drops to a three-month low</h2>
<p>Bank of America's latest fund manager survey shows that market sentiment has completely reversed from the recession panic of April, with investor sentiment returning to &#34;golden-haired girl-style bull market&#34; levels.</p>
<p>The Bank of America Bull &amp; Bear Indicator rose from previous levels to 5.4, reaching a three-month high, indicating a significant rebound in risk appetite.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/905cd078-3a76-4821-8642-09275257c8f3.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/905cd078-3a76-4821-8642-09275257c8f3.png"/></p>
<p>Fund managers' cash allocation dropped sharply from 4.8% in April to 4.2%, the lowest level in three months. Over the past two months, cash allocation decreased by 0.5 percentage points, the largest two-month decline since December 2023.</p>
<h2>Global economic expectations significantly improve, recession expectations decline sharply</h2>
<p>Investors' expectations for the global economic outlook have significantly improved. A net 46% of respondents expect the economy to weaken, a substantial improvement from the record net 82% in April.</p>
<p>More importantly, recession expectations have undergone a huge reversal: in April, a net 42% of investors believed a recession &#34;might&#34; occur, while in June, a net 36% believed a recession &#34;is unlikely.&#34;</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c5199dab-bf16-44f1-880f-7ee65b138f41.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c5199dab-bf16-44f1-880f-7ee65b138f41.png"/></p>
<p>The expectation of a soft landing rose to 66%, a new eight-month high, while the expectation of a hard landing fell from 49% in April to 13%. This improvement in expectations provides a better allocation environment for risk assets.</p>
<h2>Extreme underweight in the US dollar reaches a 20-year high, becoming the biggest contrarian trading opportunity</h2>
<p>The most extreme view in the survey is that the underweight ratio of investors in the US dollar is as high as 31%, the highest level in 20 years
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5baf81ee-e864-4e89-ac53-4397ef1170b8.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5baf81ee-e864-4e89-ac53-4397ef1170b8.png"/></p>
<p>A net 61% of fund managers believe the dollar is overvalued, an increase from 57% last month.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4d059bb2-6e52-4c8c-8896-e922d4ccefa0.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4d059bb2-6e52-4c8c-8896-e922d4ccefa0.png"/></p>
<p>At the same time, shorting the dollar has become the third most popular trade, accounting for 20%. This extreme positioning suggests that the dollar may face systemic adjustment risks.</p>
<p>The Bank of America strategist team clearly stated, &#34;The biggest painful trade of the summer is going long on the dollar,&#34; reflecting deep pessimism among investors regarding the dollar's outlook.</p>
<p>The three most popular trades include: going long on gold (41%), going long on the seven tech giants of the U.S. stock market (23%), and shorting the dollar (20%). Notably, &#34;going long on gold&#34; has become the most crowded trade for the third consecutive month, although it has cooled compared to last month.</p>
<p>Based on survey sentiment, Bank of America identified three most valuable contrarian trades: going long on the dollar, shorting gold; going long on U.S. stocks, shorting European stocks; going long on consumer stocks, shorting bank stocks.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d65224fc-d46d-48ba-bd99-7a7849e1e8ef.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d65224fc-d46d-48ba-bd99-7a7849e1e8ef.png"/></p>
<h2>International stocks favored, U.S. market's excellent performance ends</h2>
<p>In a survey about the best-performing assets over the next five years, 54% of respondents chose international stocks, only 23% chose U.S. stocks, 13% chose gold, and 5% chose bonds. This indicates that investor confidence in the long-term dominance of U.S. assets is wavering.</p>
<p>In terms of regional allocation, fund managers' overweight in emerging market stocks reached 28%, the highest level since August 2023. They maintained a 34% overweight in European stocks, while the underweight in U.S. stocks remained at 36%.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4c60f319-d81b-4a83-8ceb-a4db79425b42.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4c60f319-d81b-4a83-8ceb-a4db79425b42.png"/></p>
<p>If fund managers' predictions are correct, one of the most reliable money-making trades in years will reverse. Over the past 15 years, the U.S. stock market has outperformed international markets in 13 of those years.</p>
<h2>Corporate fundamentals improve, earnings expectations rise</h2>
<p>Fund managers believe corporate balance sheets are in the best shape since December 2015, with a net 3% of respondents considering companies &#34;under-leveraged.&#34; 32% of respondents hope companies will return cash to shareholders, the highest proportion since July 2013.</p>
<p>Global earnings expectations have significantly improved, with a net 26% of investors expecting global earnings to deteriorate in the next 12 months, a notable improvement from the extremely pessimistic expectations in April, marking the largest two-month improvement since June 2020</p>
<h2>Concerns Over Trade War Ease, But It Remains the Biggest Tail Risk</h2>
<p>The global recession triggered by the trade war is still viewed as the biggest tail risk, but the level of concern has significantly dropped from 80% in April to 47%.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6ee4b701-0055-45e7-a384-5dea51fa426d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6ee4b701-0055-45e7-a384-5dea51fa426d.png"/></p>
<p>The survey shows that respondents expect the average tariff rate imposed by the U.S. on global trading partners to be 13%, with 77% anticipating a rate below 20%.</p>
<p>Regarding the impact of Trump's &#34;Big Beautiful Plan,&#34; 59% of respondents believe it will not boost economic growth, but 81% think it will increase the U.S. government's budget deficit.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5b797d6a-5fd0-493c-89b6-6258ef56dec1.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5b797d6a-5fd0-493c-89b6-6258ef56dec1.png"/></p>
<h2>Bond Yields May Rise Further</h2>
<p>A net 21% of respondents expect bond yields to rise over the next 12 months, the highest proportion since August 2022. This reflects investors' concerns about inflationary pressures and central bank policies.</p>
<p>Investors' views on global fiscal policy have also become more cautious, with a net 36% believing that global fiscal policy is &#34;too stimulative,&#34; reaching a seven-month high.</p>
<h2>U.S. Sector Allocation: Financials Favored, Defensive Sectors Cool Off</h2>
<p>In the June fund manager survey, investors increased their allocation to energy, banks, telecommunications, and industrials, with a net 25% overweighting bank stocks, marking a recent high. In contrast, investors reduced their allocation to defensive sectors such as utilities, staples, and healthcare.</p>
<p>A net 26% of investors are underweighting energy stocks, although this is an improvement from the net 35% underweighting last month.</p>
<h2>Japan Returns as Investor Favorite</h2>
<p>In terms of national allocation, Japan has regained its position as the most favored market, followed by India. South Korea has risen from being underweight to the third most preferred market, as investors have high hopes for the policy reforms initiated by the new leadership. Thailand and Indonesia remain the least favored markets.</p>
<p>A net 21% of respondents expect Japan's economy to strengthen, a significant improvement from the net 26% expecting weakness in April. Investors' return expectations for Japanese stocks are approaching historical averages, focusing on corporate reforms, currency fluctuations, and central bank policies.</p>
<p>In the Japanese market, banks, as major beneficiaries of high interest rates, continue to be the top choice for investors, followed by semiconductors. A net 52% of participants believe that the earnings guidance from TOPIX companies is relatively conservative.</p>
<h2>Asia-Pacific Investors Overweight Tech Stocks, AI Remains Most Favored in China</h2>
<p>In the Asia-Pacific region (excluding Japan), participants are overweighting tech stocks while avoiding energy, materials, and real estate.</p>
<p>The survey has reaffirmed a positive outlook on the semiconductor cycle, with a net 38% of respondents expecting the semiconductor cycle to strengthen within the next 12 months, marking a year-to-date high.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/897d7f45-bdfa-4291-8cd6-c86832751ec7.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/897d7f45-bdfa-4291-8cd6-c86832751ec7.png"/>
In China, artificial intelligence remains the most favored theme, with 52% of respondents choosing this theme, followed by healthcare.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/27253288-3d11-4c34-a2f6-50f108bbdf07.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/27253288-3d11-4c34-a2f6-50f108bbdf07.png"/></p>

<p>The Bank of America survey shows that investor sentiment has significantly improved, with cash allocation dropping to a three-month low. Concerns over the trade war have eased but remain the biggest tail risk, and investors have a high underweight ratio of 31% in the US dollar. Bank of America presents three major contrarian trades: go long on the US dollar and short on gold; go long on US stocks and short on European stocks; go long on consumer stocks and short on bank stocks. In the Chinese market, AI remains the most favored theme, followed by healthcare</p>

- A recent Bank of America survey of 190 investment professionals indicates a significant shift in market sentiment, with a recovery to "goldilocks" levels from previous recession fears.  
- The survey highlights extreme investor aversion to the U.S. dollar, with a 20-year low in dollar allocation and a notable rise in short positions against it.  
- Additionally, 54% of respondents favor international stocks over U.S. stocks for the next five years, reflecting a decline in confidence in American assets.

Bank of America Fund Manager Survey: Trade War Concerns Ease, "Long on Gold" Cool Down, Dollar Underweight at Most Extreme Level in 20 Years