Bank of America's January Global Fund Manager Survey (FMS) highlights a notable shift in investor sentiment, with bullishness surrounding the US dollar and equities while bearish sentiment clouds commodities, bonds, and cash. These insights offer a glimpse into evolving market dynamics as fund managers adjust their portfolios for 2025.

Key Findings from the January Global Fund Manager Survey

1. Cash Levels Drop to 2021 Lows

   • Investor cash holdings have declined to 3.9%, triggering a "sell" signal under BofA's Cash Rule for the second consecutive month.
   • Historical data suggests such signals often precede weaker equity returns:
     • -2.4% global equity (ACWI) returns one month post-signal.
     • -0.7% returns three months post-signal.

2. Equity Positioning Remains Strong but Shows Rotations

   • Net 41% of fund managers are Overweight equities, though this is down from December's three-year high of 49%.
   • Regional Rotation:
     • Positioning in US equities dropped significantly from 36% Overweight to 19% Overweight.
     • Eurozone equities saw a dramatic shift from 22% Underweight to 1% Overweight, marking the largest monthly increase in 25 years.

3. Market Preferences Shift: Large Caps and Growth Lead

   • Investors moved back toward large-cap stocks and growth-oriented sectors, reversing trends favoring small caps and value stocks in prior months.

Commodities, Bonds, and Cash Face Bearish Outlook

• Commodities:
  6% of fund managers are Underweight, reflecting limited optimism for raw materials.

• Bonds:
  20% of respondents are Underweight, possibly reflecting concerns about interest rate trends and inflation risks.

• Cash:
  11% Underweight, further signaling risk-on sentiment as cash allocations reach historically low levels.

The US Dollar: A Favored Currency for 2025

• 41% of survey participants expect the US dollar to outperform this year, maintaining its position as the favored currency.
• Japanese yen follows with 29% of participants favoring its performance, bolstered by expectations of a stable macroeconomic environment in Japan.
• Most Crowded Trades:
  • "Long Magnificent 7" (53%)—the biggest names in tech.
  • "Long US dollar" (27%), reflecting ongoing investor confidence in the greenback.

Implications for Investors

BofA's survey underscores a preference for risk-on strategies focused on equities and the US dollar, but caution is warranted:

1. Equity Rotation:

   • Investors shifting from US to Eurozone equities reflect confidence in Europe's recovery potential but also the challenges facing US markets.
   • A growth-over-value tilt could signal expectations for a tech and innovation-led rally in 2025.

2. Cash and Commodities:

   • With cash holdings near historical lows, investors may face liquidity constraints in volatile markets.
   • Underweight commodities suggest muted expectations for global growth and demand.

3. Currency Dynamics:

   • Continued USD strength aligns with robust US economic data and global safe-haven flows.

Resources for Data-Driven Investment Decisions

For investors analyzing market sentiment and positioning, Financial Modeling Prep's APIs offer valuable insights into global trends:

• Sector Historical Overview API: Track sector rotations driving equity markets.
• Technical (StdDev) API: Assess volatility across asset classes for strategic allocations.
• ETF Holdings API: Identify ETF trends reflecting investor preferences.

Conclusion

The January Global Fund Manager Survey reveals a nuanced outlook as investors favor the US dollar, equities, and growth-oriented strategies, while remaining bearish on cash, commodities, and bonds. These shifts highlight the need for strategic positioning to navigate potential headwinds and capitalize on emerging opportunities in 2025.

By leveraging data-driven tools and monitoring key market indicators, investors can better align with evolving trends and mitigate risks in an increasingly dynamic financial landscape.