BofA Fund Manager April Survey: Is Bearish Positioning a Bullish Signal?

Author: Charu Chanana, Chief Investment Strategist

Key Insights

• The BofA Fund Manager Survey indicates a significant downgrade in growth expectations and an increase in inflation concerns, yet the prevailing view remains a soft landing rather than a recession.
• Investors have adopted a more defensive stance, reducing equity exposure and increasing cash holdings, but not to the extent of panic.
• Geopolitical risks are viewed as the primary tail risk, with oil being the main conduit for inflation and sentiment shifts.
• Expectations are declining faster than fundamentals, suggesting a cautious but not desperate market environment.

Macro Signals

The survey reveals a clear message: fund managers are increasingly pessimistic about growth while simultaneously worrying about persistent inflation, leading to heightened stagflation fears. However, the majority still believe a recession is unlikely, indicating a shift towards a more uncomfortable market regime rather than an outright collapse.

Geopolitical Signals

Geopolitical tensions have emerged as a significant risk factor, with many managers anticipating a resolution to current conflicts by April 2026. However, expectations for a full normalization of supply chains remain low, particularly concerning the Strait of Hormuz, indicating ongoing supply risks.

Positioning Signals

Investor positioning is defensive but not extreme. Key observations include:

• Global equity allocation has decreased to a net 13% overweight, down from 37% in March.
• Cash levels have risen to 4.3%, the highest since May 2025, but still below the 5% threshold that typically indicates fear.
• Regional positioning shows a more selective approach, with U.S. equities improving slightly while Eurozone equities have seen a significant decline.

Sector Positioning

Investors are not fully retreating to defensive sectors but are instead becoming more selective. There is a cautious willingness to re-enter growth-sensitive sectors like technology and communication, while still prioritizing resilience and quality.

Commodities and Currency Outlook

Oil has become a crowded trade, while gold's status as a geopolitical hedge has diminished. The survey indicates a medium-term bias towards dollar weakness, with many managers citing loose monetary policy as a structural headwind for the currency.

Conclusion: Cautious Optimism

While the survey reflects a cautious market sentiment, it also suggests potential for improvement. If geopolitical tensions ease and oil stabilizes, the current defensive positioning could lead to a more constructive market environment. However, risks remain, and the market's response to evolving conditions will be critical.