Caution! Fund Manager Cash Level Triggering Sell Signal

U.S. stocks have been on a relentless climb, with valuations hitting their highest since the dot-com bubble. But now, a rare warning signal is flashing: fund managers' cash levels have dropped to a danger zone. Could this be the turning point?

According to Bank of America’s latest FMS survey, the average cash level among fund managers has dropped to 3.9%, triggering the bank’s “sell signal.” Historical data shows that since 2011, this type of “sell signal” has been triggered 17 times. In the four weeks following, the median return of the S&P 500 was -2%, with the worst decline at -29%, and the best gain at +3%.

The S&P 500’s peak price-to-earnings ratio (based on trailing peak earnings) has now reached 26.3×—the highest since the 2000 dot-com bubble—and 53% above its historical median.

Combined with the low cash-level sell signal, this suggests investors should be on high alert in the near term.

The semiconductor sector’s weight in the S&P 500 has surged from 2–4% historically to 12.1% today.

Melius Research proposed a bold analogy: if semiconductors are the “new oil” of the digital era, then their weight could continue rising, just like the energy sector, which peaked at nearly 30% of the S&P in 1980.

The core logic behind this comparison is that, in the industrial age, oil was the lifeblood of the global economy; in today’s AI- and data-driven economy, chips serve the same foundational and strategic role. If this thesis holds, semiconductor stocks may still have significant room to grow.

Now let’s look at some charts related to China’s A-share market:

According to Goldman Sachs' dividend discount model, if the dividend payout ratio of A-shares gradually rises over the next decade, valuations could significantly re-rate.

Specifically, if the payout ratio rises from the current ~40% to Japan’s 50% or Europe’s 60%, the fair value of A-shares could rise by 11% and 25%, respectively.

Goldman Sachs also expects A-share buybacks to rise by 35% year-on-year in 2025, reaching 600 billion yuan.

The appeal of leveraged buybacks by Chinese companies is strong, driven by extremely low borrowing costs (re-lending rate ceiling of just 2.25%), relatively high equity cost (about 10%), and declining corporate leverage.

Historical data supports the positive effect of buybacks: A-share companies that announced repurchases had median stock returns of 5% in the following 6 and 12 months.

According to a Q1 2025 Invesco survey, 59% of global sovereign wealth funds now view China as a medium- to high-priority investment destination over the next five years, up from 44% last year.

The survey also found that 78% of respondents expect China’s tech and innovation sectors to achieve global competitiveness.

In terms of market access, 64% of respondents prefer publicly listed equities—making this a key source of incremental capital for A-shares. Private markets ranked second at 49%.

Foreign capital strategies are increasingly focused on specific areas like semiconductors and electric vehicles.

Let’s turn to macroeconomic and demographic charts:

“Born with a silver spoon” and “wealth rarely lasts three generations” both have scientific backing.

A study tracking tens of millions of people’s intergenerational wealth mobility found a striking non-linear relationship between a grandfather’s wealth percentile and a grandson’s probability of reaching the top 1%:

If the grandfather was in the top 10%, the grandson had a 1.9% chance of making it to the top 1%; If the grandfather was in the top 2%, the probability rose to 3.7%; And if the grandfather was in the top 0.1% or even a billionaire, the odds skyrocketed to 9.9% and 13.5%, respectively.

This indicates that wealth advantage is heavily concentrated at the very top of the pyramid—the higher the starting point, the stronger the head start for future generations. This aligns with common intuition.

The study also confirms a strong "mean reversion" effect—“riches rarely last three generations” is backed by data.

Over 90% of families whose grandparents were in the top 1% failed to maintain that status in their grandchildren’s generation, with most falling out of the top ranks within two generations.

Despite Trump’s persistent opposition to immigration, American public sentiment is shifting.

According to the latest Gallup poll, a record 79% of Americans now believe immigration is good for the U.S., while support for tighter immigration restrictions has plunged from 55% in 2024 to just 30% in 2025.

Notably, even among Republicans—often seen as anti-immigration—positive views of immigration surged from 39% to 64% over the past year.

The U.S. has seen explosive growth in H-2A seasonal farmworker visas, with nearly 300,000 issued in fiscal year 2024, the vast majority to Mexican laborers.

This highlights America’s growing dependence on foreign farm labor. As a wealthy, urbanized country with plenty of non-manual jobs, very few Americans are willing to work on farms.

Any effort to replace foreign labor entirely with domestic workers would likely lead to a collapse in U.S. agricultural production.

Redfin analysis shows the U.S. housing market has shifted in favor of buyers.

As of April 2025, there were 1.9 million active sellers versus 1.5 million buyers—a 33.7% gap, the widest since 2013.

This reversal is largely due to high home prices and mortgage rates suppressing demand, while expiring low-rate mortgages have pushed more homeowners to list.

Redfin predicts home prices will fall 1% by year-end.

Numerator survey data from Amazon Prime Day 2025 shows consumers are prioritizing essentials over discretionary items.

Clothing and footwear (30%) and household necessities (29%) were the most purchased categories, while high-priced electronics (18%) lagged. Two-thirds of items sold were under $20.

This preference for low-cost necessities suggests weakening consumer confidence.

Citi’s U.S. Economic Surprise Index shows that previously strong "hard data" (e.g., output, sales) has sharply weakened since late May 2025, now aligning with persistently soft survey data.

This shift from perception to reality raises the odds of a Fed rate cut.

Goldman Sachs expects U.S. tariff rates to gradually rise.

Tariffs implemented so far have raised the effective rate by 9 percentage points, with another 7.8 points expected by early 2027.

According to Barclays’ latest survey, after August 1, global tariff rates will stabilize between 10% and 18%—the highest since World War II.

China’s reported exports to ASEAN have significantly exceeded ASEAN’s reported imports from China, with the gap widening since the 2018 U.S.-China trade war.

This is especially true in consumer sectors like textiles and plastics. ASEAN’s share of China’s total exports has risen from 9% in 2010 to 16% in 2024, confirming the role of transshipment trade.