A May global fund manager survey by Bank of America reveals a record surge in investors overweighting U.S. stocks, with over 60% betting that the 30-year Treasury yield will exceed 6%, highlighting a market landscape where rising risk appetite coexists with pressures on long-term rates. According to the report, assuming significant yield volatility over the next 12 months, 62% of respondents expect the 30-year Treasury yield to rise above 6%, while only 20% anticipate it falling below 4%. Currently, the 30-year Treasury yield is approximately 5.13% to 5.14%, having briefly touched 5.16% during Monday's session, marking its highest level since October 2023.
The survey, conducted from May 8 to 14, covered 200 respondents with combined assets under management totaling $517 billion, with results released on Tuesday. Notably, the April survey did not include expectations for the 30-year yield direction, making this the first time the topic has been addressed.
Over half of respondents are overweight U.S. stocks A net 50% of fund manager respondents in May reported being overweight U.S. stocks, a sharp increase of 37 percentage points from a net 13% in April, representing the largest single-month rise in the survey's history. Strong corporate earnings seasons, sustained optimism regarding large-scale capital expenditures in artificial intelligence, and expectations for Federal Reserve rate cuts have collectively driven global equities near record highs, while respondents' average cash allocation also decreased from 4.3% to 3.9%.
The core drivers supporting this significant increase in equity allocations encompass three aspects: robust corporate earnings seasons, continued market optimism fueled by AI-related expenditures, and interest rate benefits stemming from the Fed's potential rate cut outlook. The simultaneous decline in cash allocation levels indicates a clear trend of capital shifting toward risk assets. Regarding macroeconomic outlook, respondents overall lean toward optimism. Only 4% believe the economy will experience a "hard landing"—characterized by a sudden contraction in economic growth and the labor market—while 39% expect a "no landing," meaning sustained strong economic momentum without significant slowdown. This distribution suggests that recession concerns have substantially diminished among institutional investors, providing confidence for aggressive equity positioning.
Over 60% bet on 30-year yield exceeding 6%
In terms of long-term rate expectations, respondents' views are notably skewed toward upside risks. 62% believe that if significant yield volatility occurs within the next 12 months, the 30-year Treasury yield is more likely to break above 6% than move downward; only 20% are betting on the yield falling below 4%. The 30-year Treasury yield currently stands around 5.13%, having risen to 5.16% during Monday's session, reaching its highest level since October 2023. Despite overall optimistic sentiment, respondents remain highly vigilant regarding inflation risks. 40% of respondents identified "reflation" as the current biggest tail risk, ranking it above all other single risk factors. With international oil prices currently above $100 per barrel and peace talks between the U.S. and Iran at a standstill, these factors have already impacted global bond markets, aligning with most respondents' expectations for rising long-term yields.
Strait of Hormuz crisis may persist for months
On the geopolitical front, 66% of respondents anticipate that bottlenecks in the Strait of Hormuz will be resolved within the coming months. The situation surrounding this critical global oil transit chokepoint is closely linked to international oil prices and inflation expectations, making it a key macroeconomic variable currently under close watch by institutional investors.
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