BofA Survey Shows Investors Are Unprepared for Stock Correction

Core Viewpoint - The recent stock market pullback has surprised many investors, as fund managers were notably bullish prior to the downturn, with a significant increase in expectations for global growth and a record low in cash levels [1][2]. Group 1: Investor Sentiment - A net 38% of fund managers expected stronger global growth, a significant increase from the previous month, leading to the highest sentiment measure in over four years [1]. - Cash levels among fund managers have fallen to a record low, while equity allocation has risen to the highest level since December 2024, with 48% of managers overweight in equities [1]. Group 2: Risk Assessment - The BofA Bull and Bear indicator reached a "hyper-bull" level, suggesting that investors should consider risk hedges and safe havens, yet nearly half of the participants reported lacking protection against a sharp decline in equity prices, the highest level since 2018 [2]. - Geopolitical conflict has emerged as the primary risk to financial markets, surpassing concerns about a potential AI bubble for the first time since October 2024 [4]. Group 3: Market Reactions - Following the survey, President Trump's threats of new tariffs on European countries regarding Greenland escalated trade war concerns, negatively impacting risk appetite and leading to declines in European stocks and US equity futures [3].