Global fund manager sentiment deteriorated sharply in April, though it has not yet triggered systemic selling signals.
According to Trading Follow Wind, the Bank of America April Global Fund Manager Survey (FMS) showed investor sentiment fell to its lowest level since June 2025, with the decline in growth expectations marking the largest drop since March 2022. Meanwhile, the rise in inflation expectations reached its highest level since May 2021, and rate cut expectations are being gradually priced out.
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The survey was conducted between April 2 and 9, with 193 fund managers managing a combined $563 billion participating. Approximately three-quarters of respondents had completed their answers before the ceasefire announcement on April 8.
The survey revealed that 76% of respondents expect the global economy to fall into &#34;stagflation&#34; (growth below trend combined with inflation above trend), a significant jump from 51% last month. At the same time, global equity allocations dropped sharply from a net overweight of 37% to a net overweight of 13%, reaching the lowest level since July 2025.
Geopolitical conflicts ranked as the top tail risk for the second consecutive month, with fund managers forecasting year-end oil prices at $84 per barrel, approximately 38% higher than forecasts at the beginning of the year.
<h2>Sentiment Deteriorates Sharply, But Recession Expectations Remain a Minority</h2>
The Bank of America FMS composite sentiment index—covering cash levels, equity allocations, and global growth expectations—plummeted from 5.6 to 3.7, the lowest since June 2025. Previous recent lows included 1.7 during the &#34;tariff panic&#34; in April 2025, 1.6 when the S&amp;P 500 hit phase lows in October 2023, and 0.3 during the UK pension crisis in October 2022.
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Despite the significant weakening of sentiment, investors' judgments on economic prospects remain relatively moderate.
52% of respondents believe the global economy is most likely to achieve a &#34;soft landing,&#34; 32% expect a &#34;no landing,&#34; and only 9% anticipate a &#34;hard landing.&#34; The net global growth expectation dropped sharply from positive 7% last month to negative 36%, the lowest since August 2025. Global corporate earnings expectations also turned negative for the first time since September 2025, with the net value falling to -14%, compared to a high of +44% earlier this year.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6412bfc8-3954-4970-a617-4254177a54f8.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/6412bfc8-3954-4970-a617-4254177a54f8.png"/>
<h2>Inflation Expectations Surge, Interest Rate Paths Diverge</h2>
The spike in inflation expectations is one of the most significant changes in this survey.
A net 69% of respondents expect global CPI to rise over the next 12 months, a sharp increase from 45% last month, marking the highest level since May 2021.
Meanwhile, a net 4% of respondents expect short-term interest rates to rise over the next 12 months, the first time this has occurred since November 2022, indicating that rate cut expectations are being gradually priced out.
Expectations regarding the Federal Reserve show clear divergence: 58% of respondents still expect the Fed to cut rates over the next 12 months, 29% expect rates to remain unchanged, and 10% expect rate hikes.
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Regarding the European Central Bank, 46% of respondents expect rate hikes, 36% expect rates to remain unchanged, and only 12% expect rate cuts—a result reflecting growing market concern over inflation pressures in the eurozone.
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Expectations for yield curve steepening also fell sharply, with a net 29% of respondents expecting steepening, down dramatically from the peak of 80% two months ago to the lowest level since November 2022.
<h2>Geopolitical Risks Dominate Tail Risks; Oil and Semiconductors Become Most Crowded Trades</h2>
Geopolitical conflicts ranked as the top tail risk for the second consecutive month, with 44% of respondents listing it as the primary risk, up significantly from 14% in February.
The median forecast among respondents for year-end oil prices was $84 per barrel, approximately 38% higher than the starting point of $61 per barrel for Brent crude in early 2026; 28% of respondents expected oil prices to rise to $90 or more per barrel, compared to just 12% a month ago.
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In terms of the most crowded trades, &#34;long oil&#34; and &#34;long global semiconductors&#34; tied for first place, each accounting for 24%, replacing last month's &#34;long gold&#34; (35%) and &#34;long global semiconductors&#34; (35%).
Regarding credit risk, 57% of respondents believe US shadow banking (private credit) is the most likely source of systemic credit events, a judgment that has ranked first for nine consecutive months; the credit default risk indicator rose to its highest level since October 2023, with a net 65% of respondents believing credit default risk is above normal levels, compared to just 17% two months ago.
<h2>Asset Allocation: Reducing Japan and Eurozone, Increasing Emerging Markets and Technology</h2>
April allocation adjustments showed clear defensive and rotation characteristics.
Investors increased allocations to cash, the US dollar, and the telecommunications sector, while reducing holdings in equities, Japan, and healthcare:
Japanese stocks moved from a net overweight of 14% to a net underweight of 11%, marking the first significant underweight since November 2024; eurozone stock overweight ratios fell from 21% to 4%, the lowest since January 2025; global bank overweight ratios dropped from 24% to 11%, the lowest since October 2024.
Emerging market stocks remain the asset class with the highest absolute allocation, with a net overweight of 41%, one standard deviation above the historical mean; technology stock overweight ratios rose from 7% to 14%, with investors adding positions against the backdrop of overall weakening sentiment. The degree of dollar underweight narrowed to the lowest level since March 2025, indicating some investors began covering short dollar positions.
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Regarding contrarian trade opportunities, Bank of America strategists pointed out that if a bull surprise occurs in the second quarter, the most likely triggers would be falling oil prices, declining inflation, and implemented rate cuts, which would be most favorable for bonds, non-essential consumer goods, REITs, and Japanese stocks; if a bear surprise occurs, rising recession risks would exert the greatest pressure on commodities, raw materials, and emerging market stocks.

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The Bank of America April Global Fund Manager Survey shows a sharp deterioration in market sentiment, with stagflation expectations surging to 76% and inflation expectations rising to their highest level since May 2021, while rate cut expectations are being gradually priced out. 'Long oil' and semiconductors have become the most crowded trades, while geopolitical risks and credit default concerns continue to dominate the market. Allocation has shifted toward defensive positions, reducing exposure to Japan and Europe while increasing holdings in emerging markets and technology

- The April 2025 Global Fund Manager Survey by Bank of America reveals a significant decline in investor sentiment, hitting its lowest since June 2025, with expectations for economic stagflation rising sharply.  
- Despite deteriorating sentiment, a majority predict a "soft landing" for the global economy, with inflation expectations reaching a high unseen since May 2021.  
- Asset allocation shifted defensively, with increased investment in cash and telecoms, while emerging markets and technology stocks saw higher allocations as investors adjusted their strategies amidst wavering confidence.

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