Bank of America takes firm position on inflation, economy

Every month, Bank of America surveys some of the world's largest institutional investors to build a picture of how professional money managers see the global economy.

The latest edition of that survey landed with a specific number that stood out: Equity allocations had jumped to 50% overweight from 13% the prior month, the steepest single-month increase since 2001, Axios reported.

Behind that number is a set of views about the economy, inflation, and the Federal Reserve that represents a meaningful departure from where professional investors were positioned only a year ago.

The survey covers 198 institutional fund managers overseeing approximately $540 billion in assets, making it one of the most closely watched monthly readings of institutional sentiment on Wall Street.

Fund managers predict soft landing for global economy

The dominant expectation among surveyed fund managers is that the global economy will achieve a soft landing, meaning inflation continues cooling without triggering significant economic damage.

The survey showed 47% of respondents expected that outcome, while 40% predicted a "no landing" scenario in which growth stays resilient, even as interest rates remain elevated. Only 5% expected a hard landing, Reuters reported.

That distribution marks a shift from where sentiment stood as recently as August 2025, when a prior survey showed that 68% expected a soft landing and 22% predicted no landing.

The soft-landing share has compressed as more managers have migrated to the no-landing camp, reflecting a growing belief that the economy is not merely avoiding recession, but also continuing to expand at a healthy pace, despite elevated borrowing costs.

Why the Fed rate hike call is survey's most surprising finding

The inflation and growth data have not moved far enough to justify aggressive rate cuts, and the survey results reflect that. Forty percent of surveyed managers now expect the Federal Reserve to raise rates over the next year, compared with only 28% who anticipate cuts, Axios noted.

Inflation came in as the top tail risk, cited by 40% of respondents. That positioning would have seemed implausible two years ago, when nearly all of the debate was about the timing and pace of rate cuts rather than the possibility of additional tightening.

The shift reflects how much the economic backdrop has changed. Labor markets have remained resilient, consumer spending has held up, and earnings have consistently exceeded expectations, leaving policymakers with less urgency to ease and investors with less confidence that easing is coming at all.

What the record equity allocation shift signals about confidence

The 50% overweight equity allocation the survey recorded was not just the steepest monthly jump since 2001. It was also the highest absolute level of stock allocation the survey has tracked since January 2022, the month before equities began falling sharply in the wake of rising inflation and energy prices from the Russia-Ukraine war, Axios confirmed.

The previous month's reading had been 13% overweight, making the move from 13% to 50% in a single survey period exceptional by any historical standard.

The context for the jump was partly geopolitical. More than half of the surveyed managers said they expected the Strait of Hormuz to reopen by June, a forecast that proved accurate after the U.S.-Iran agreement announced on June 14.

That expectation appears to have unlocked a rotation into risk assets that had been waiting for clarity on the conflict that drove oil prices sharply higher and kept some investors on the sidelines through much of the first four months of the year.

What the no-landing economic scenario means for investors

The 40% of managers predicting a no-landing economy are making a specific claim: The traditional relationship between high interest rates and eventual economic weakness may not apply in the current cycle.

Their argument is that businesses have adapted to higher borrowing costs, households are spending from a position of accumulated savings and rising wages, and labor markets have proved far more durable than past rate-hike cycles would have predicted.

More Economy:

• JPMorgan sends another message on strait of Hormuz, oil prices
• Warren Buffett has a message on energy prices for all Americans
• Goldman Sachs sends strong message on next Fed rate cut

If the no-landing camp is right, investors may need to rethink how they evaluate the relationship between interest rates and equity valuations. The standard framework treats elevated rates as a headwind for stocks because they raise the discount rate applied to future earnings.

A no-landing economy complicates that framework by suggesting corporate earnings may grow fast enough to more than offset the valuation pressure from higher rates, which is effectively the argument the equity allocation data express in quantitative form.

What the survey says that the headlines are not covering:

• The highest allocation to equities since January 2022 is notable not just as a sentiment reading but also as a positioning risk. When fund managers are already 50% overweight stocks, there is less dry powder on the sidelines to fuel additional gains. BofA analysts themselves flagged this point in the August 2025 survey when calling the reading "not a clear and obvious inflection point" but noting that equity allocations were "on [the] rise but not at extreme levels."
• The sharp drop in commodity allocation, which fell to its lowest level since June 2017, preceded the Strait of Hormuz reopening and the oil price decline that followed the Iran deal. Managers who had already reduced commodity exposure were better positioned for the energy-price drop than those still holding energy as an inflation hedge, Investing.com noted.
• The gap between the 40% expecting a Fed rate hike and the 28% expecting cuts implies a meaningful portion of institutional capital is now positioned for the Fed moving tighter rather than looser, with significant implications for bond positioning and duration risk, Reuters noted.
• Investor sentiment overall reached its highest level since February 2026 in the latest survey, but remained below the peaks reached after Trump's tax cuts passed Congress late last year. This suggests that the optimism reflected in the equity allocation jump has not yet reached the kind of euphoria that has historically preceded sharp corrections, Axios reported.

What investors should watch as this sentiment plays out

The data capture a moment when institutional investors are making one of the most aggressive collective bets on equities in more than two decades, driven by soft-landing expectations, Hormuz optimism, and a recalibration of Fed policy expectations that has moved the entire conversation from rate cuts to the possibility of rate hikes.

That combination is historically unusual. Bull markets driven by both economic optimism and rate-hike expectations tend to be more fragile than those driven by falling rates alone.

The next pressure tests will come from inflation data and corporate earnings. If price pressures reaccelerate or earnings disappoint, the gap between a 50% overweight equity allocation and the actual economic environment will close quickly.

For now, the weight of institutional opinion sits firmly in the camp that expects neither of those scenarios to arrive, and the record equity allocation is the clearest quantitative expression of that conviction.

Related: Moody’s drops stunning take on the economy