As Nasdaq falls, 'buy the dip'... Big investors go all-in despite 'AI bubble' theory

Persistent stock optimism

BoA "Fund managers' cash allocation at an all-time low"

Although concerns about a bubble in artificial intelligence (AI) related stocks have not faded in the stock market, fund managers appear to be more optimistic about equities than ever.

According to Bank of America (BoA)'s monthly global fund manager survey released on the 16th (local time), the cash allocation in these portfolios fell from 3.7% last month to 3.3% this month, marking an all-time low. Cases where cash allocation was below 3.6% occurred only nine times since 1998.

Michael Hartnett, BoA's chief investment strategist, said, "Optimism toward the stock market is the strongest since July 2021, buoyed by the belief that policymakers will tolerate some economic overheating to support growth," while also cautioning that "extreme (equity) bullish positioning is in fact the biggest headwind for risky assets." He warned against investors already being effectively 'all in' on stocks.

In this survey, net increase in equity weighting (overweight response rate - underweight response rate) was 42% points, the highest since December last year. It was higher than November (34% points) and October (32% points). Financials and healthcare were preferred, while energy, cash, and consumer staples were targeted for weight reductions.

Investment enthusiasm for tech stocks also remained strong. While the Nasdaq index fell 1.08% through the 16th of this month, investors moved to buy at lower prices. Fund managers' allocation to the technology sector expanded to its highest level since July last year.

Reporter Han Gyeong-je