BofA September Global Fund Manager Survey: Top risk shifts to the bond market! US Treasury yields surpass the AI bubble, cash allocations rise.

BofA Releases September 2026 Global Fund Manager Survey: Top risk shifts to the bond market! US Treasury yields surpass the AI bubble, cash allocations rise. BofA has released its September 2026 Global Fund Manager Survey. This survey covered 190 institutional investors managing a total of $512 billion in assets. The report shows that institutions remain bullish on AI capital expenditure and the resilience of the global economy, but the core market risk has shifted. Fund managers slightly raised cash positions, risk appetite declined, and they remain highly vigilant about the US midterm elections and volatility in US Treasury yields. Based on the survey data, this article interprets the current asset allocation logic of global institutions and the warning signals in the market. Macro resilience remains, policy uncertainty rises Institutions overall maintain a relatively optimistic judgment on the global economy. 55% of fund managers believe the economy will continue in a "no landing" state, 38% expect a soft landing, and only 2% predict a hard landing. Many investors expect double-digit corporate earnings growth over the next 12 months. But market concerns are also accumulating. A net 33% of respondents believe companies are currently overinvesting, a record high; half of institutions expect the global economy may move toward stagflation. Expectations for monetary policy have changed markedly. More and more investors believe short-term rates still have room to rise, with a net 36% of respondents expecting higher short-term rates, the highest since September 2022. Market expectations for Fed policy have been revised rapidly. 41% of fund managers believe the Fed may hike rates before the US midterm elections in November, up sharply from 22% in August. As for the Treasury's bond buyback program, nearly 70% of institutions judge that the policy is unlikely to push down US Treasury yields, and the risk of bond market disruption should not be ignored. Risk focus shifts, AI capex resilience still favored The market's biggest tail risk has completed a rotation. Disorderly rising US Treasury yields (33%) have overtaken the AI bubble to become the top risk in institutions' eyes. At the same time, massive capital expenditure by AI giants is seen as the most likely source of a systemic credit event, at 42%. Even with risk concerns, institutions still believe AI capital expenditure has strong resilience. 79% of fund managers judge that AI hyperscalers will not cut capital expenditure in 2026. On the trading side, long global semiconductors remains the most crowded trade, at 53%. The report offers contrarian trade ideas: long UK equities, short US equities; long consumer staples, short banks; long small caps, short large caps. The US midterm elections have become an important variable. 44% of institutions expect a split Congress; expectations for a full Democratic sweep have risen to 31%, and 45% of investors believe that under such a scenario there would be "higher US Treasury yields and lower stocks." Institutional repositioning: adding cyclicals and financials, abandoning traditional defensive sectors On the asset side, fund managers' cash ratio rose from 3.5% to 3.9%. BofA's cash signal remains in the "sell zone." Institutions note that only when cash rises back to the neutral range of 4-5% would it be appropriate to further increase risk assets. Bond allocations remain significantly underweight, with a net 48% of institutions underweight bonds, the lowest since May 2022. Equities remain overweight overall, but positioning has fallen somewhat from August. There has been clear rotation at the sector level, with large inflows into banks, healthcare, and industrials. The overweight in banks rose to the highest since November 2025; healthcare saw significant additions. In contrast, the traditional defensive sector of consumer staples saw major reductions, with a net 33% underweight, the lowest since January 2004. REITs were also reduced by institutions. Regionally, institutions are overweight emerging markets and US equities, and remain underweight UK equities. Overall, institutions have not turned completely bearish on growth and the AI track, but they have already begun defensive positioning. On the one hand, they recognize the strong momentum of AI capital expenditure; on the other hand, they are wary of the credit risks brought by heavy investment, while listing bond market volatility as the primary concern. In terms of style, institutions have abandoned traditional defensive consumer staples and shifted toward financials, healthcare, and industrials, reflecting a comprehensive weighing of the interest rate environment and the economic cycle. Going forward, key areas to track include the path of US Treasury yields, the Fed's policy path, and the outcome of the US midterm elections. These variables will determine the subsequent direction of global risk assets.