Fund managers have never been so alarmed over corporate spending

By Jules Rimmer

Fund managers are the most bullish for five years - but cash levels crept up in February.

AI capex for 2026 is forecast to exceed $600 billion with huge sums splurged on constructing datacenters and some fund managers are expressing unease about it

A record percentage of fund managers believe corporate America is splurging too much on capital expenditure when returns are uncertain, and a quarter of them regard a bubble in AI as the biggest tail risk for markets.

CIOs telling CEOs to slow capex

This was the standout takeaway from Bank of America's monthly fund managers' survey released on Tuesday. While the 162 participants polled in the week to Feb. 12 were still "uber-bullish," chief investment strategist Michael Hartnett makes the point that "asset price upside is harder when all are positioned for it."

The motivations for such confidence from portfolio managers are the conviction that there will be "no landing" for the global economy (52% of those polled), a pickup in expectations for above-trend economic growth and predictions for global earnings growth to reach double digits or better over the next year. This optimism level among survey respondents is the highest since June 2021.

BofA Global FMS investor sentiment highest since June 2021.

This mindset explains why the combined allocation toward equities and commodities is at 76% while the bearish stance on bonds is rising. According to the survey, 40% of respondents are underweight bonds and there's a consensus that longer-term U.S. Treasury yields are heading higher. At the same time fund managers increasingly perceive a risk of a damaging credit event in private equity/ fixed-income or AI hyperscaler having issues with its capex commitments.

This confidence, however, seems partly at odds with the enthusiasm for gold at present, which is the most crowded position with a net 50% of fund managers long. Gold (GC00) has replaced the Magnificent Seven MAGS in this category for the last two months, and the weighted average price expectation for this cycle is around $6,200 per ounce, some 23% above current levels.

Even while investor sentiment is at a five-year high, cash levels crept up from 3.2% in January to 3.4%. This is the first rise in seven months, indicating that behind the bullish outlook there are some lingering doubts.

While fund managers in the survey are underweight bonds, the dollar and U.S. stocks, Hartnett and his team, Elyas Galou, Anya Shelekhin and Myung-Jee Jung, highlight they are overweight global equities, especially emerging markets EEM and Europe.

The shift between January and February into energy XLE and materials XLB and out of U.S. tech XLK was pronounced in the survey.

Related: Why the 'HALO' trade boosting hard assets is no fluke, according to Morgan Stanley

-Jules Rimmer

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02-17-26 0903ET