Global investors are demonstrating unprecedented confidence in equity markets, with cash reserves in professional portfolios falling to their lowest level on record. This aggressive shift into stocks underscores a wave of bullish sentiment, even as concerns linger over the soaring valuations of major technology companies.
Cash Reserves Evaporate as Investors Chase Returns
According to the closely watched monthly survey from Bank of America, the average cash balance held by fund managers plummeted to 3.3% in December 2025, down from 3.7% the previous month. This marks the lowest cash level since the survey's inception in 1999.
"Even at the height of previous bubbles, investors did not dare to go to these levels," remarked Elyas Galou, an investment strategist at BofA. He warned that this positioning makes the market fragile, noting that any bearish news could now inflict significant damage.
Equity Allocations Surge, Led by Tech
The survey data reveals a massive move into risk assets. A net 42% of fund managers reported being overweight equities, the highest reading since 2022. The rush into stocks has been particularly pronounced in the technology sector, where overweight positions have reached their highest point in over a year.
This enthusiasm persists even though major benchmark indices are already heavily weighted towards tech stocks, fueled by the ongoing artificial intelligence (AI)-driven rally. U.S. markets have rebounded powerfully from an April 2025 slump, which was triggered by a global tariff salvo from former U.S. President Donald Trump, and are now trading near record highs.
Bullishness at a Peak, But Risks Loom
Despite recent market jitters over lofty tech valuations, the overall sentiment among fund managers, as measured by BofA's composite gauge of cash levels, equity allocations, and growth expectations, has hit its most optimistic level since mid-2021.
"Investors are clearly more positive into 2026 and positioning has moved higher," said Emmanuel Cau, head of European equity strategy at Barclays. He cautioned, however, that "the bar for positive surprises has likely moved higher."
The current measure of optimism has now surpassed the peak of the "Trump trade" rally at the end of 2024. Supporting this bullish stance, expectations for global corporate profits have risen to their highest level since 2021.
Arun Sai, a senior multi-asset strategist at Pictet Asset Management, summarized the mood: "The market is definitely bulled up... After a year of policy uncertainties and a big stagflation scare which has now faded, investors are looking ahead."
The Persistent Fear of an AI Bubble
While sentiment is overwhelmingly positive, the survey identified clear anxieties. The possibility of an "AI bubble" remains the top cited risk among investors for December 2025, though the proportion of managers naming it as their primary concern eased to 38% from 45% in November.
This tension between roaring optimism and underlying valuation fears defines the current market landscape. Investors are pouring money into commodities and stocks at a record pace, betting on strong earnings growth and lower interest rates, even as they keep a watchful eye on the sustainability of the tech-led advance.
