Global institutional investors have adopted an increasingly optimistic stance, with Bank of America’s July Global Fund Manager Survey pointing to stronger confidence in economic growth, artificial intelligence capital expenditure and the prospect of a less restrictive monetary policy environment. The survey, conducted from July 2 to July 9, also revealed that portfolio positioning has become increasingly aggressive, raising questions over how much positive news is already reflected in asset prices.

Investor Confidence Moves Toward a “No Landing” Scenario

The survey found that a record 54% of fund managers expect a “no landing” scenario for the global economy, meaning continued economic expansion without a meaningful recession. Only 2% anticipated a hard landing, highlighting the extent to which recession concerns have diminished among institutional investors. U.S. equity allocations also reached their highest overweight position since December 2024, while average cash holdings declined from 4.1% to just 3.6%.

The combination of stronger growth expectations, lower cash balances and increased equity exposure suggests that investors are positioning for continued economic resilience. However, the low cash allocation also indicates that the market has comparatively less defensive liquidity available should economic or geopolitical conditions deteriorate unexpectedly.

AI Spending Remains a Central Pillar of the Bullish Case

Artificial intelligence remains one of the strongest foundations of the current market outlook. Some 61% of respondents do not expect major AI hyperscalers to reduce capital expenditure in 2026, compared with 28% anticipating cuts. At the same time, 82% identified long global semiconductor positions as the most crowded trade, the highest reading for any single position in the survey.

The data highlight a significant distinction between confidence in the AI investment cycle and concern about its valuation and positioning risks. While many investors continue to believe AI spending will support corporate earnings and productivity, 45% now identify an AI bubble as the largest tail risk. This suggests that the principal concern is increasingly whether spending and earnings can justify elevated expectations rather than whether AI demand will disappear.

Rate-Hike Risk Has Not Disappeared

Monetary policy represents another important assumption embedded in current positioning. The survey showed that 83% of respondents do not expect the Federal Reserve to raise rates before the November midterm elections. Investors also lowered their end-2026 oil-price forecast to $71 a barrel from $86 in June, contributing to more subdued inflation expectations.

For markets, this creates a relatively favorable combination of assumptions: resilient growth, contained inflation, continued AI investment and limited near-term policy tightening. The risk is that a reversal in any one of these variables could have an outsized impact because positioning has become so concentrated.

Outlook: The survey points to a market environment that remains fundamentally constructive but increasingly vulnerable to disappointment. The combination of very low cash holdings, elevated U.S. equity exposure and record semiconductor crowding means that even a moderate shift in Federal Reserve expectations, a slowdown in AI capital expenditure, or renewed geopolitical and inflationary pressures could generate sharper-than-usual volatility. For Israeli and global investors, the key issue is therefore not simply whether the economic expansion continues, but whether corporate earnings and productivity gains can continue to validate the optimistic assumptions already embedded in market positioning. Monitoring AI spending, inflation, Treasury yields, Federal Reserve communication and geopolitical developments will remain particularly important in assessing whether the current bullish consensus can be sustained.