91% of Bank of America, BAC, fund managers surveyed indicated that American stocks are overvalued

Roughly 91% of investors now say U.S. stocks are overvalued, the highest share since records began in 2001, according to Bank of America’s latest global fund manager survey. Even though allocations to global equities climbed to the strongest level since February, a net 16% of respondents still reported being underweight U.S. equities.

Investor sentiment overall improved to the most optimistic in six months, reversing some of the gloom that followed President Donald Trump’s tariff announcements earlier this year, which had rattled markets and raised recession fears. Strategist Michael Hartnett noted that investors now assign the lowest probability of a hard landing since January.

The S&P 500 and other U.S. benchmarks have pushed to record highs, fueled by better-than-expected corporate earnings and expectations that the Federal Reserve will soon begin cutting interest rates as growth moderates. That optimism has prompted forecasters at firms such as Citigroup to upgrade their outlooks for U.S. equities in the second half. Still, Hartnett and other analysts warn the rally could risk morphing into a bubble as easier monetary policy and lighter regulation converge.

The August survey also showed investors holding cash at 3.9% of assets, a level BofA associates with a “sell signal” for stocks. Positioning data from Goldman Sachs showed hedge funds offloaded $1 billion of U.S. equities last week, even as long-only investors added $4 billion.

Monetary policy remains in focus as Trump continues to pressure the Fed to ease rates. About 54% of survey participants expect the next Fed chair to lean on quantitative easing or yield curve control to manage the U.S. debt burden. Chair Jerome Powell is set to step down in May.

Other highlights from the poll, conducted July 31 to August 7 and covering 169 investors with $413 billion in assets: 68% expect a soft landing for the global economy over the next year, 22% see no landing, and just 5% anticipate a hard landing. Nearly half said emerging market stocks are undervalued — the highest share since early 2024. Inflation expectations climbed to a three-month high, with a net 18% predicting higher global CPI readings.

The biggest risks cited were a trade war sparking global recession (29%), persistent inflation blocking Fed cuts (27%), a disorderly surge in bond yields (20%), an AI-driven equity bubble (14%), and dollar weakness (6%). The most crowded trades were long positions in the “Magnificent Seven” tech stocks (45%), shorting the dollar (23%), and long gold (12%).