Global fund manager sentiment plummeted in March 2026, as geopolitical risks and inflation expectations returned to the market focus, replacing the AI bubble as the number one tail risk, while private credit was viewed at a record rate as the biggest hidden danger of a systemic credit event.
According to the Bank of America (BofA) March Global Fund Manager Survey (FMS), the composite sentiment indicator dropped sharply from 8.2 to 5.6 this month, marking a six-month low. Meanwhile, the cash allocation surged from 3.4% to 4.3%, the largest single-month increase since the COVID-19 pandemic hit in March 2020, with the cash rule that triggered a reverse &#34;sell signal&#34; returning to neutral territory.
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BofA strategist Michael Hartnett pointed out that current sentiment is sufficiently pessimistic to support shorting oil when prices break $100 per barrel, shorting the dollar when the dollar index exceeds 100, buying when the yield on 30-year U.S. Treasuries reaches 5%, and accumulating positions when the S&amp;P 500 index hits 6600 points.
This survey was conducted from March 6 to 12, with 210 fund managers participating, managing a total of $589 billion in assets.
It is noteworthy that despite the significant cooling of sentiment, BofA's various positioning indicators are still quite far from &#34;extreme bear market&#34; levels—current stock allocations and global breadth indicators do not show the extreme signals typically seen at market bottoms, indicating that an ideal tactical entry point for stocks and credit assets has not yet formed at this stage.
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<h2>Sentiment Cools: Growth Expectations Collapse, Inflation Concerns Resurface</h2>
The reversal of macro expectations is the most striking change in this survey. The proportion of respondents optimistic about global economic growth plummeted from a net 39% last month to a net 7%, marking the largest single-month decline in recent times. Meanwhile, inflation expectations rebounded sharply—net 45% of respondents expect global CPI to rise in the next 12 months, compared to only 9% last month.
The jump in inflation expectations directly suppressed interest rate cut expectations. The proportion of respondents expecting short-term rates to decline shrank from a net 46% last month to a net 17%, the lowest since February 2023. Expectations for the yield curve to continue steepening also cooled significantly, with a net 56% of respondents expecting the yield curve between 3-month and 10-year U.S. Treasury yields to steepen, a sharp drop from a net 80% last month.
Judgments about the global economic situation also underwent a structural shift. In macro scenario classification, 51% of respondents expect &#34;stagflation&#34; (below-trend growth combined with above-trend inflation) in the next 12 months, up significantly from 42% last month;
The expected proportion of &#34;prosperity&#34; (high growth, high inflation) is expected to drop from 36% to 29%.
Nevertheless, the market pricing for a hard landing remains very low—only 5% of respondents believe the economy will experience a hard landing, 46% expect &#34;no landing,&#34; and 44% anticipate a soft landing. &#34;No landing&#34; has become the market consensus for three consecutive months.
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<h2>Tail Risk Shift: Geopolitics at the Top, Private Credit Alarm Upgraded</h2>
The market's assessment of risk sources has undergone a significant shift. On the issue of &#34;maximum tail risk,&#34; 37% of respondents listed geopolitical conflict as the primary threat, a sharp increase from 14% last month; the &#34;AI bubble,&#34; which topped the list last month, has fallen to only 10% support. Geopolitical tensions related to Iran are seen as one of the important catalysts driving this shift in sentiment.
In terms of assessing the sources of systemic credit risk, 63% of respondents identified private credit as the most likely area to trigger a systemic credit event, marking the highest percentage recorded in the history of the survey. Meanwhile, the credit default risk indicator surged to its highest level since April 2025, with a net 46% of respondents believing that default risk is above normal levels, compared to only 17% last month.
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Other sub-indicators corresponding to financial stability also show signs of comprehensive weakening. The FMS financial market stability risk indicator rose from -1.8 to 1.2, with 6 out of 7 risk factors deteriorating relative to January, covering emerging market risk, credit risk, business cycle risk, monetary policy risk, counterparty risk, and geopolitical risk.
Although the overall liquidity situation remains positive, a net 47% of respondents rated liquidity positively, a significant decline from the peak of 66% two months ago, marking the lowest level since May 2025.
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<h2>AI Hype Cooling: No Longer the Biggest Risk, Nor the Most Crowded Trade</h2>
The presence of AI-related assets in this survey has significantly diminished. On the question of whether &#34;AI stocks are in a bubble,&#34; 51% of respondents believe there is no bubble, while 38% think there is. Concerns about excessive capital expenditure on AI have also eased—those believing companies are over-investing dropped from a record high net 33% last month to a net 22%.
In terms of expectations for AI's impact, respondents believe that AI's greatest role in the next 12 months will be in driving corporate profit expansion through improved productivity (27%), followed by the inflation effect on commodities brought about by AI infrastructure development (26%), and 22% believe AI will bring deflationary pressure to the labor market by raising unemployment rates
From the perspective of crowded trades, the allure of &#34;going long on AI/Magnificent 7&#34; has largely faded—only 9% of respondents believe that &#34;going long on Magnificent 7&#34; is currently the most crowded trade, a significant drop from the peak of 54% in December last year. The title of the most crowded trade is now shared by &#34;going long on gold&#34; and &#34;going long on global semiconductors,&#34; each receiving 35% support.
Notably, Bank of America's contrarian trading logic suggests that in a scenario of easing tensions in Iran, the lighter-positioned Magnificent 7, consumer stocks, and Chinese stocks may outperform the still-heavy-positioned emerging markets, Japan, semiconductors, banks, and industrial stocks.
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<h2>Asset Allocation: Shifting from &#34;Boom&#34; to &#34;Stagflation,&#34; Commodity Positions Surge</h2>
In terms of asset allocation, fund managers are shifting their portfolios from the &#34;Boom&#34; narrative to the &#34;Stagflation&#34; narrative. This month, the focus of increased positions is on Japanese stocks, healthcare, and cash, while reductions are seen in consumer discretionary, European stocks, and bank stocks.
In absolute positioning, the most overweight asset classes among respondents are emerging market stocks, healthcare, overall equities, and commodities; the least overweight are bonds, consumer discretionary, and the US dollar.
The overweight ratio for commodities has risen to a net 34%, the highest since April 2022, exceeding the historical average by 2.1 standard deviations, indicating strong demand for inflation hedging.
In regional stock allocation, the overweight ratio for emerging market stocks has increased to a net 53%, the highest since February 2021, exceeding the historical average by 1.6 standard deviations; Japanese stocks have quickly shifted from a net underweight of 1% last month to a net overweight of 14%.
In stark contrast, US stocks remain in a net underweight position of 17%, with consumer discretionary stocks facing an even greater net underweight of 27%, the lowest since December 2022.
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<h2>Political Variables: Rising Expectations for a Democratic &#34;Blue Wave,&#34; Oil Price Expectations Significantly Below Current Prices</h2>
On the political front, expectations for the 2026 midterm elections in the US are quietly changing. 54% of respondents expect the election outcome to be &#34;Democrats control the House, Republicans control the Senate&#34;; however, the proportion expecting a Democratic sweep (controlling both the House and Senate) has risen from 11% two months ago to 28%, indicating a subtle adjustment in market pricing of political risk.
Regarding gold, as gold prices continue to rise, a net 38% of respondents believe that gold valuations have become too high, up from 31% last month. However, &#34;going long on gold&#34; remains tied for the most crowded trade, indicating that despite increasing valuation pressures, investors' demand for safe-haven assets and inflation hedging continues to support gold prices
In terms of the US dollar, a net 24% of respondents are underweight on the dollar, slightly narrowing from 28% last month, with a net 46% believing that the dollar is overvalued.
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Regarding the commodity market, there is a significant gap between fund managers' oil price predictions and the current market price. The survey shows that only 11% of respondents expect the price of Brent crude oil to exceed $90 per barrel by the end of the year (during the survey, the Brent oil price was around $102 per barrel), with a weighted average expected price of $76 per barrel, implying about a 26% downside, reflecting a general judgment that the geopolitical premium is difficult to sustain.
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According to the Bank of America Global Fund Manager Survey, the overall sentiment this month has plummeted to a six-month low. Concerns about inflation have intensified, and geopolitical conflicts have replaced the AI bubble as the number one risk. The risk of private credit defaults has reached a record high, and cash positions have increased. Commodity overweights have hit a two-year high, as the market shifts from a "boom" to a "stagflation" defensive mode

- In March 2026, global fund manager sentiment sharply declined due to renewed geopolitical risks and inflation expectations, diminishing previous concerns over AI bubbles.  
- The Bank of America’s survey indicated a sentiment indicator drop from 8.2 to 5.6, with cash allocations rising to 4.3%, the highest monthly increase since March 2020.  
- Although bearish sentiment has increased, signals for a market bottom are not yet evident, and fund managers have shifted asset strategies towards inflation hedges, particularly in commodities and emerging markets.

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Bank of America Fund Manager Survey: Stock Market Frenzy Fades, the Market's Biggest Fear Has Changed!