Bank of America Survey: Record Number of Investors Believe US Stocks Are Overvalued

According to a Bank of America Corp. survey, a record 91% of fund managers consider US stocks overvalued after a strong rebound since April lows. Despite this, the allocation to the US equity market rose to its highest level since February, with a net 16% still underweight. The survey also showed improved overall confidence, with a majority believing a soft landing is the most likely outcome.

A record 91% of fund managers surveyed by Bank of America Corp. [1] consider US stocks overvalued following a strong rebound since April lows. Despite this, the allocation to the US equity market reached its highest level since February, with a net 16% still underweight. The survey also indicated improved overall confidence, with a majority predicting a soft landing as the most likely outcome for the global economy in the next 12 months.

The Bank of America survey, conducted from July 31 to August 7, polled 169 participants with $413 billion in assets. The survey showed that 68% of respondents believed in a soft landing, while 22% predicted no landing and just 5% anticipated a hard landing. This sentiment reflects a significant shift from earlier periods when economic uncertainty was more pronounced.

Cash levels as a percentage of total assets remained at 3.9%, a level consistent with a so-called sell signal for stocks. Despite the overvaluation concerns, investors have rotated out of Europe to emerging markets, where overweights reached 37%, the highest since February 2023. Sectors such as utilities, energy, and financials also saw increased allocations.

The survey highlighted several key trends. A record 91% of participants indicated that US stocks are overvalued, the highest proportion ever recorded in data going back to 2001. The biggest tail risks cited by respondents included a trade war triggering a global recession (29%) and inflation preventing Fed rate cuts (27%). The most crowded trade was "long Magnificent 7" at 45%, while 52% saw no artificial intelligence bubble and 55% believed AI is already boosting productivity.

Investors' allocation to global equities climbed to the highest level since February, reflecting optimism about future economic performance. However, the survey also noted that hedge funds sold a net $1 billion in US stocks last week, while long-only investors bought $4 billion, highlighting a divergence in market sentiment.

Overall, the Bank of America survey provides insights into the current market sentiment, with fund managers expressing cautious optimism despite concerns about stock valuations. The survey results underscore the importance of staying informed about market dynamics and the diverse views of market participants.

References:
[1] https://ca.investing.com/news/stock-market-news/fund-managers-cut-cash-to-39-in-most-bullish-stance-since-february--bofa-4149412
[2] https://www.bloomberg.com/news/articles/2025-08-11/bofa-poll-shows-record-number-of-investors-say-stocks-overvalued
[3] https://finance.yahoo.com/news/bofa-poll-shows-record-number-080445334.html
[4] https://seekingalpha.com/article/4812003-bank-of-america-mispriced-capital-return-engine