Key Takeaways:

✔️ Global fund manager cash levels decline to 3.5%–the lowest since 2010
✔️ Investors remain optimistic, favoring equities while avoiding bonds & cash
✔️ EuroStoxx, Nasdaq & Hang Seng rank as top indices for 2025
✔️ The tech sector experiences its greatest drop in long positions since 2022
✔️ Fear of recession declines to a 3-year low

1. Fund Managers Reduce Cash to 14-Year Lows

Cash allocations fell to 3.5% in February, marking the lowest level since 2010, according to the Bank of America Fund Manager Survey.

A drop in cash signifies a greater risk appetite, as investors shift focus toward equities and higher-risk investments.

Market Sentiment Score:
February’s overall sentiment improved to 6.4 from 6.1, reflecting a favorable outlook even amidst valuation concerns.

2. Where Are Investors Directing Their Capital?

Overweight Positions:
✔️ Equities (+35%) – demonstrated the greatest exposure, indicating a readiness for risk.
✔️ Euro-area stocks – reached an 8-month high.
✔️ Defensive sectors – Including utilities and healthcare, enjoyed increased interest.

Underweight Positions:
❌ Bonds (-11%) – Investors are steering away from fixed income.
❌ Cash holdings – Reached the lowest allocation since 2010.

Top Equity Indices for 2025 (Investor Preferences):

• EuroStoxx (22%)
• Nasdaq (18%)
• Hang Seng (18%)

3. Tech Sector Faces a Sell-Off

The tech industry observed the largest month-over-month decline in long positions since September 2022.

Sectors with Lower Exposure:

• Tech
• Finance
• Materials

Underlying Reasons for the Shift:

• Rising apprehensions about overvaluation–89% of fund managers cite that US stocks are expensive.
• Shifting focus to interest-sensitive sectors as expectations for elevated rates evolve.

4. Fears of Recession at 3-Year Low

Approximately 82% of fund managers no longer anticipate a recession.

This follows a significant transformation in sentiment compared to 2023, when concerns about a downturn prevailed.

Although optimism regarding growth in China is ongoing, emerging markets continue to lack traction in fund priorities.

5. Conclusion: What Lies Ahead for Markets?

Promising signals are apparent:

• Record low cash levels = increased equity investment.
• Equities continue as the top preference among fund managers.
• Reducing recession fears provoke investor strategies around economic stability.

Potential Risks:

• U.S. stocks perceived as overvalued could see corrections.
• Shifts in engagement away from technology—can future growth withstand interest?
• Expectations against inflation vs. rate-cut concerns lead to uncertain central bank policies.