• Global investors turn bearish as Iran and private credit concerns end “frothy bull” sentiment
• Net 45% of investors expect higher global CPI in the next 12 months, up from 9% a month ago
• Net 17% of investors expect lower short-term rates, lowest since February 2023 and down from 46% a month ago
• Measure of risk sentiment drops to 5.6 from 8.2 a month ago, but well above April 2025’s 1.8
• Investors are most long commodities since April 2022 with a net 34% overweight
• Net 53% of investors were overweight emerging-market equities, the highest since February 2021
• Participants had the lowest allocation to consumer discretionary stocks since December 2022
• USD positioning swung rapidly from record underweight a month ago to neutral levels
• Geopolitics and inflation now top tail risks, replacing AI bubble concerns

The Bank of America Global Fund Manager Survey (FMS) is one of the most influential monthly reports in the financial world. It polls roughly 200 to 400 institutional fund managers (people managing hundreds of billions of dollars in hedge funds, pension funds, and mutual funds) to see how they are positioned in the markets.

It’s useful as a contrarian indicator. In fact, when positioning gets overstretched on one side or the other, the risk of aggressive unwinding increases. We’ve seen what happened with precious metals in late January and with the US dollar this month. Complacency is punished in the markets. There’s generally a catalyst triggering the reversals or just multiple factors signalling an inflection point.

In the March survey, we can see that the stock market sentiment has finally pulled back from “frothy” levels. This is great news for the bulls as once the US-Iran war ends, the relief rally will have much more room to run and we will probably see new record highs quickly.

We can also notice that investors don’t expect rate cuts anytime soon now, which shouldn’t be surprising given the hawkish repricing we’ve experienced in the past couple of weeks. This opens up a nice asymmetric opportunity if the rate hike bets prove to be wrong.

The record US dollar shorts have now been unwound and the positioning is back to neutral levels. The USD is likely to selloff once the US-Iran war ends as rate cut bets would likely return and the positive sentiment would push the other major currencies up.

Lastly, investors are most bullish commodities since April 2022. Again, not surprising with oil prices trading around 2022 levels and energy generally having the biggest weight in commodity indices. We will see an aggressive reversal in oil prices once the US-Iran war ends.