Bank of America survey: "U.S. exceptionalism" cools as nearly 90% of fund managers see U.S. stocks overvalued

According to the Bank of America's February global fund manager survey, 89% of respondents believe US stocks are overvalued, the highest level since at least April 2001.

Michael Hartnett, a strategist at Bank of America, noted that while the percentage was at a 20-year high, an average of 81% of fund managers believed US stocks were overvalued in the 2020s.

Hartnett also said the trade in US exceptionalism appeared to have peaked, with a slight easing in February.

He said the trade was "characterized by a strong dollar and a bull market led by the seven giants".

This month, 73% of respondents said the trade in US exceptionalism was the most crowded trade, down from a three-year high of 80% in January.

Managers' cash levels have fallen to 3.5%, the lowest since 2005.

The survey showed that 82% of respondents no longer expect a recession, with concerns about a recession at a three-year low.

As the global recession expectation faded, stock investors were turning to bond-sensitive assets and European markets.

Meanwhile, 77% of respondents expect the Fed to cut rates this year, with the percentage of those expecting a "soft landing" rising to 52% from 50%, the first rise in five months.

The survey showed that concerns about a potential trade war had resurfaced, with 39% of managers saying it was the biggest tail risk.