Cash is gaining prominence, according to a recent survey by Bank of America (BofA), one of the world's largest multinational financial and banking corporations. The survey reveals fund managers are becoming less optimistic, opting to increase cash allocations at the fastest rate since the pandemic erupted in 3/2020.
BofA's investor sentiment index fell to a 6-month low, though it remains significantly above its 4/2025 trough when US President Donald Trump announced broad tariffs. This decline in sentiment coincides with a notable rise in cash holdings. Survey participants reported cash allocations increased from 3,4% in February to 4,3% last week.
 |
A bank employee in Hanoi counts US dollars. Photo: Giang Huy |
A bank employee in Hanoi counts US dollars. Photo: Giang Huy
Fund managers have also shifted their focus from "AI bubble" concerns to geopolitical risks and inflation. This reflects the impact of the Middle East conflict and rising oil prices. The report quotes BlackRock, the world's largest asset manager, stating: "There is almost nowhere to hide from this short-term oil supply shock."
Michiel Plakman, head of global equities at asset management firm Robeco, said investors are "accepting the reality" of a prolonged war in the Middle East. This could significantly harm markets.
Seema Shah, chief global strategist at Principal Asset Management, shared that a global economic slowdown could affect the factors that have sustained financial markets, making investor sentiment more cautious. She further emphasized that while many investors separate geopolitical conflict from other issues like private credit or "AI bubble" concerns, these factors could become closely linked if the macroeconomic context changes.
Bank of America's analytics team, led by chief strategist Michael Hartnett, conducted the survey. 181 fund managers participated, representing about 500 billion USD in assets.
The shift towards pessimism is evident not only in cash holdings and overall sentiment but also in a sharp decline in growth expectations. The percentage of respondents expecting economic improvement in the next 12 months dropped from 39% to 7%. Additionally, rising inflation expectations are a notable data point, with 45% forecasting a higher global consumer price index (CPI) next year.
Forecasts of rising inflation have significantly impacted previously anticipated interest rate cuts. Only 17% of asset managers believe central banks will lower interest rates, a sharp decrease from 46% in the February survey. Consequently, the scenario of the US Treasury yield curve rising until 2026, which 80% of asset managers supported in February, now has only 56% backing.
By Tieu Gu (Sources: Financial Times, MarketWatch)
