Big-money investment portfolio managers are the most optimistic they’ve been in years, according to a monthly Bank of America survey released Tuesday morning, as borderline ecstasy floods Wall Street, though the poll revealed a possible trade war concerns investing bigwigs moving forward.
Sentiment is overwhelmingly positive on Wall Street.
The fund manager respondents, who collectively manage $482 billion in client assets, hold an average of 3.5% of their portfolios in cash, the lowest level since 2010, less than half of the more than 6% cash level hit in Oct. 2022 when inflation and interest-rate concerns peaked this cycle.
The heavy positioning away from cash and into stocks indicates little fear among investors, and Bank of America’s February survey reading revealed 82% of fund managers believe a global recession is unlikely over the next year, the highest proportion since February 2022, when Russia invaded Ukraine; the State Department said Tuesday the U.S. and Russia will name “high-level teams” to negotiate that war’s end.
Some 89% of respondents said U.S. stocks are overvalued, the most since at least April 2001, the extent of the bank’s data.
That provides further evidence of the so-called “animal spirits” driving U.S. stocks to more and more record highs as U.S. “exceptionalism peaks,” remarked Bank of America’s chief investment strategist (animal spirits refer to the tendency for overwhelmingly positive sentiment to drive up stock prices).
The survey was conducted Feb. 7-13 among 205 fund managers.
Sentiment is strong, but the survey revealed Wall Street’s biggest concern in 2025: A global trade war. Fund managers identified a trade war as the most bearish development this year, while the potential for a trade war leading to a global recession overtook inflation leading to higher rates as the top “tail risk” for financial markets (tail risks refer to events which may lead to a sharp, sudden selloff). Tariffs, or levies on imported goods, are the hallmark economic policy of President Donald Trump, who announced last week he intends to place reciprocal tariffs matching trade partners’ trade barriers, including value-added taxes, on all imports.
58%. That’s the proportion of fund managers who say gold would be the best-performing asset in an all-out trade war, smashing other potential safe haven assets like the dollar (15%) and bitcoin (3%). Gold prices have surged 10% in 2025, smashing the S&P 500 benchmark U.S. stock index’s 4% return.
To the U.S. exceptionalism end, the S&P is valued at historically bloated levels and investors are paying much more now on average for a slice of American companies. The index’s 22.3 forward price-to-earnings ratio (P/E), which compares the index’s price to projected future profits, is about 36% more than the average price-to-earnings valuation of 16.4, dating back to 2000. From 2001 to 2019, the S&P’s forward P/E didn’t exceed 20.
The S&P traded Tuesday within 0.1% of its all-time high set last month as U.S. stocks continue a remarkable stretch, returning about 50% over the last two years, dwarfing the 20% gain from Europe’s Stoxx 600 index and a 3% loss from China’s CSI 300. Much of the American equity rally stems from investor excitement regarding artificial intelligence, headlined by California-based AI leader Nvidia, which has enjoyed a more than 500% stock rally over the last two years.