Global investors are growing more concerned that companies may be overinvesting, even as overall market sentiment remains strongly bullish, according to Bank of America’s latest monthly fund manager survey released on Tuesday.
The survey, which covered 162 fund managers overseeing a combined $440 billion in assets, showed that cash allocations rose slightly to 3.4%, up from January’s record-low level of 3.2%. Despite the modest increase in cash holdings, investors continued to hold overweight positions in commodities and equities, while remaining significantly underweight bonds.
Bullish outlook meets rising corporate caution
Macroeconomic optimism strengthened further in the February survey. Expectations for a global economic boom reached their highest level since February 2022. At the same time, projections for corporate earnings growth climbed above 10%, marking the most positive outlook since 2021.
However, concerns about corporate spending are intensifying. A record share of respondents said companies are investing too aggressively, raising fears of inefficient capital allocation. Chief investment officers indicated they would prefer firms focus on strengthening balance sheets rather than expanding capital expenditure in the current environment.
AI bubble seen as top market risk
Artificial intelligence-related bubbles once again ranked as the biggest tail risk for global markets. Investors flagged elevated valuations in the AI sector as a potential trigger for volatility, particularly if earnings fail to justify rapid investment flows.
Overall, the survey highlights a clear contrast: strong investor optimism about global growth and earnings, paired with growing caution over corporate overinvestment and sector-specific bubbles.
