Wall Street All-In on Stocks: BofA Sees a Sell Signal

According to Benzinga, Wall Street has rarely been this confident. Global fund managers are betting on stronger economic growth, double-digit corporate earnings growth, and expecting the Federal Reserve to hold rates steady before the November midterm elections. Equity allocations have reached their highest level since 2021, while cash holdings have fallen to one of the lowest levels in the survey's history.

However, a subtle warning in Bank of America's latest Global Fund Manager Survey is easy to overlook. The problem may not be what investors expect to happen next—but that almost everyone expects the same thing.

Everyone is already in—BofA says it’s time to retreat

The August survey, led by Chief Investment Strategist Michael Hartnett, included 203 investors managing a total of $581 billion in assets. This marks the third most bullish reading since 2022.

Global equity allocation rose to a net 56% overweight, the highest since November 2021. At the same time, average cash holdings dropped to just 3.5% of assets.

This is significant because BofA’s own contrarian investment framework has already flashed a red light. Hartnett’s cash rule indicates that when cash levels fall to 4% or below, a 'sell' signal is generated. At 3.5%, the current reading is clearly below this threshold.

Bullish consensus is becoming extreme

BofA’s Bull & Bear Indicator currently stands at 9.3, above the historical 8.0 level that has triggered sell signals in the past.

A record 56% of fund managers now expect a 'no landing' scenario over the next 12 months—meaning no economic slowdown—while only 4% anticipate a hard landing.

Meanwhile, 37% of investors expect global corporate earnings to grow by at least 10%, the highest proportion since August 2021.

On monetary policy, 72% of investors believe the Fed will not raise rates before the November midterms.

Even AI spending remains largely unchanged: 71% of investors do not expect any of the major AI cloud hyperscalers to cut capital expenditures by 2026.

The share of investors expecting a Democratic sweep of Congress fell from 27% to 23%. Currently, a net 37% of investors expect double-digit earnings growth over the next year—the highest since August 2021.

No one is preparing for disappointment.

This creates another problem: positioning.

Everyone is piling into the same trade

'Long global semiconductors' remains the most crowded trade in the market, selected by 53% of respondents. This trade is most commonly executed via the VanEck Semiconductor ETF (SMH-US) or the iShares Semiconductor ETF (SOXX-US).

The AI boom is also the biggest tail risk in this survey.

About 32% of investors view the AI bubble as the market’s biggest threat, while 38% believe capital spending by AI hyperscalers is most likely to trigger a systemic credit event.

In other words, investors are aggressively betting on AI while simultaneously viewing it as their biggest risk.

This contradiction may be the most important signal in the entire survey.

Market positioning remains heavily skewed toward risk assets. Tech stock allocation rose to a net 30% overweight, the highest since May; banks are also at 30%. Underweight in energy stocks narrowed from 20% to 3%. U.S. equity exposure reached a net 27% overweight, the highest since December 2024.

A net 16% of respondents believe gold is undervalued—the highest proportion since March 2023.

BofA’s contrarian trade is the real message

The team’s proposed contrarian strategy directly opposes the market’s mainstream positioning: go long bonds and short commodities; long staples and short tech; long discretionary and short banks; and long UK equities and short U.S. equities.

Hartnett says the current positioning supports investors 'retreating or rotating within risk assets, rather than adding more risk.'

Kevin Warsh, former Fed governor, will speak at the Jackson Hole Symposium from August 27 to 29. Fund managers expect his tone to be neutral (53%); 31% expect a hawkish stance, and only 7% anticipate a dovish one.

This survey suggests the market has already found an answer to every problem in front of it.