Fund managers' bullishness hit highest level in over three years

Money managers around the world are more optimistic about markets than they’ve been in over three years, with cash sitting at an all-time low of 3.2%, Bank of America’s monthly survey showed Tuesday.

The bank’s Bull & Bear reading jumped to 9.4, what analysts describe as “hyper-bull” levels. At the same time, these investors have pulled back most of their safety nets against potential drops, keeping the smallest amount of protection against market corrections since January 2018. The findings come from 96 fund managers overseeing $575 billion in total assets.

A net 38% now think economic performance will get stronger, while recession worries have fallen to a two-year low. Bloomberg reported that most participants believe an economic “no-landing” situation is what’s coming.

Market liquidity looks as good as it did back in 2021.

People answered the survey between January 8 and January 15, right before President Donald Trump said he’d put higher tariffs on European partners unless the United States can buy Greenland.

When the survey went out matters because markets took a sudden turn downward this week that might catch many investors off guard who’d gotten comfortable taking on risk.

Cash among fund managers has dropped to record lows while stock holdings went up to their highest since December 2024, with 48 percent of managers holding more stocks than usual. The big drop in cash prompted Michael Hartnett, who leads strategy at Bank of America, to call it “the crash in cash.”

These numbers pushed the Bull and Bear reading into an area that usually means investors ought to be adding protection and safer bets. But the data showed nearly half don’t have any protection against sharp drops, matching the highest unprotected level seen since 2018.

Markets face unexpected turbulence

Hartnett pointed out that having little protection works when markets keep doing well. But he said it becomes a real problem when things suddenly go the other way.

That change might’ve already started.

That warning proved timely. Just after the survey period ended, President Donald Trump announced plans to impose 10% tariffs on eight European nations he claims are blocking American efforts to purchase Greenland from Denmark. The announcement triggered immediate market reactions, with European stocks declining over two consecutive days.

Trump has also threatened 200% tariffs on French wine and champagne while continuing to push for Greenland acquisition, despite French President Emmanuel Macron rejecting his peace initiative proposal.

European Union capitals have begun discussing potential retaliatory tariffs of up to $108 billion on American goods following Trump’s Saturday announcement about new European tariffs.

BoE warns of spillover risks

The concerns about market vulnerability proved well-founded, with major financial authorities sounding alarms about the risks. The governor of the Bank of England has warned there are “substantial risks” of spillovers to UK financial markets from Donald Trump’s attacks on the independence of the Federal Reserve and his threat to annex Greenland.

Andrew Bailey told an influential committee of MPs on Tuesday that BoE officials “worry considerably” about how financial markets will react to rising geopolitical tensions and what impact this will have on the UK financial system.

“The level of geopolitical uncertainty and the level of geopolitical issues is obviously a big consideration because they can have financial stability consequences,” Bailey said in response to a question about US political risks and Trump’s threat to seize Greenland.

Wall Street stocks were set for heavy losses on Tuesday, and the US dollar fell sharply, following a more than 1% drop in the UK’s FTSE 100 index and a 1.3% fall in the Stoxx Europe 600 index.

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