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Global investors stay “uber-bullish” but asset price upside in Q1 is harderCommodity overweight at highest since May 2022 Equity overweight at highest since December 2024Most optimistic on earnings since August 2021, but investors saying companies are “overinvesting” at new recordAI bubble is top tail riskLong gold is the most crowded tradeRecord shorts on US dollar, most bearish since 2012The Bank of America Global Fund Manager Survey (FMS) is one of the most influential monthly reports in the financial world. It polls roughly 200 to 400 institutional fund managers (people managing hundreds of billions of dollars in hedge funds, pension funds, and mutual funds) to see how they are positioned in the markets. It’s useful as a contrarian indicator. In fact, when positioning gets overstretched on one side or the other, the risk of aggressive unwinding increases. We’ve seen what happened with precious metals recently as silver plummeted by 47% in just a week. Complacency is punished in the markets. There’s generally a catalyst triggering the reversals or just multiple factors signalling an inflection point.For example, traders have been very bearish the US dollar due to the de-dollarisation narrative (not supported by the data) and very dovish expectations for the Fed’s interest rate path. The greenback could actually bounce back in 2026 with improving labour market or just with the other major central banks getting more dovish due to weakening data.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
Investors are feeling bullish, but here’s the catch: asset price gains in Q1 might be tougher to come by. With commodity and equity overweights at their highest levels since mid-2022 and late 2024 respectively, it shows a strong sentiment shift. However, the optimism around earnings is tempered by concerns that companies are overextending themselves, which could lead to a correction. The AI bubble is also a significant risk, suggesting that while enthusiasm is high, the underlying fundamentals may not support such valuations. Traders should keep an eye on how these dynamics play out, especially in sectors heavily invested in AI. Watch for key technical levels in commodities and equities; if we see a pullback, it could trigger a wave of profit-taking. The crowded long gold position indicates that any shift in sentiment could lead to rapid sell-offs, so monitoring gold prices closely is essential. Overall, while the bullish sentiment is palpable, the risks are mounting, and traders need to be prepared for potential volatility.
📮 Takeaway
Keep an eye on gold prices and watch for potential corrections in equities and commodities as investor sentiment shifts.
