Investors are the most bearish they’ve been in nearly a year, but Bank of America says that could actually be a sign to jump into the market.
At first glance, Bank of America’s latest fund manager survey doesn’t paint a positive picture of investors’ current mood, but analysts led by the bank’s Michael Hartnett say that certain conditions could turn the bearish sentiment readings into contrarian buy signals.
Bank of America outlined three negative sentiments found in the survey that they said are all contrarian positives for risk assets, with one big caveat: if the Iran war ceasefire sends oil prices below $84.
Oil is still stuck near its psychologically important threshold of $100 a barrel, with WTI oil prices at $96.20 and Brent crude at $97.65 on Tuesday.
Over a third of fund managers expect oil to trade at $84 per barrel by year-end, compared to more than a quarter expecting oil to be over $90.
Here are the three bearish signs that Bank of America says could function as contrarian indicators to buy risk assets:
1. Investor sentiment takes bearish turn
Fund manager sentiment hit its most bearish point since June 2025.
Bank of America calculates sentiment based on cash levels, equity allocation, and growth expectations. The firm’s sentiment measure dropped to 3.7 from 5.6 the month prior.
Cash levels sat at 4.3%, the highest point since May 2025, while global equity allocation dropped to its least overweight reading since July 2025.
2. Growth expectations tank
Growth expectations took a nose-dive from March to April as the war dragged on.
The survey shows that fund managers’ economic growth expectations hit the lowest point since August 2025, and the reading marked the sharpest month-over-month decline since 2022.
3. Soaring inflation forecasts
Investor expectations for inflation also saw a dramatic move, hitting their highest point since May 2021.
Expectations of higher inflation and slower growth are consistent with mounting stagflation concerns.
More than three-quarters of fund managers expect stagflation, meaning high inflation and slowing growth, compared to just over half the month prior.
The number of investors surveyed saying that inflation was the biggest tail risk continued to grow month-over-month.
Still, BofA acknowledged that while growth outlooks have dimmed, most investors still aren’t expecting a recession. They said that 70% of survey respondents think a recession is unlikely, with a “soft landing” of the economy being the macro base case.
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