Investor Sentiment Soars 30% on Corporate Profit Expectations

The latest global fund manager survey conducted by the Bank of America in July revealed a significant uptick in investor sentiment, reaching its highest level since February. This optimism is largely driven by a substantial increase in expectations for corporate profits, marking the largest surge since July 2020. The investor confidence index, which encompasses growth expectations, cash levels, and stock allocations, rose from 3.3 to 4.3 over the past month, hitting its highest point since February 2025.

The survey indicated that a net 11% of respondents anticipate a decline in global corporate profits over the next 12 months. This figure represents a notable improvement from 26% in June and 90% in April, marking the most significant three-month improvement since August 2020. However, cash levels have decreased from 4.2% in the previous month to 3.9% in July, triggering a "sell signal."

Investor risk appetite has also seen a significant increase, with approximately 40% of fund managers taking on higher-than-normal levels of risk. This surge in risk appetite is the largest seen in nearly three months. The survey defines risk appetite as the performance of U.S. stocks consistently outperforming global economic growth expectations. This month, a net 31% of respondents expect global economic growth to slow, down from 46% in June and 82% in April. Currently, the S&P 500 index has risen by 10.9% compared to a year ago.

The survey is known for its accuracy in signaling key market turning points over the past 12 months. The latest data shows that investor risk appetite has grown at the fastest pace since 2001 over the past three months. In July, there was a notable increase in investor allocations to U.S. and European stocks, as well as the technology sector. This shift reflects a growing confidence in the global economy and asset allocation, driven by advancements in AI and interest rate cuts. However, the rapid influx of funds into risk assets has raised concerns about potential market corrections, as the survey is often seen as a contrarian indicator.