Bullish investors pile into stocks as cash levels sink to record low

Traders work on the floor of the New York Stock Exchange (NYSE) at the opening bell in New York on Dec. 16, 2025. Photo by CHARLY TRIBALLEAU / AFP via Getty Images

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Global asset managers’ cash holdings have fallen to a record low in a sign of investors’ bullishness about the AI-fuelled stock market rally, despite recent jitters over big tech valuations.

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Average cash holdings in portfolios dropped to 3.3 per cent in December, down from 3.7 per cent in November, according to a closely watched survey of fund managers by Bank of America — the lowest level since the survey began in 1999.

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Investors have poured money into stocks and commodities, with a net 42 per cent of fund managers overweight equities, the highest level since 2022, the survey showed. The proportion of fund managers overweight technology stocks also reached the highest level for more than a year, despite benchmark indices already being heavily weighted towards the sector.

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“Even at the height of previous bubbles, investors did not dare to go to these levels” of cash allocation, said Elyas Galou, investment strategist at BofA. “It means positioning is fragile to any bearish developments…any bad news is going to do a lot more damage.”

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U.S. stocks are trading close to record-high levels, having bounced back from the April slump that followed U.S. President Donald Trump‘s salvo of global tariffs, powered by tech stocks’ storming rally and hopes of lower interest rates.

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However, the rally has shown signs of wavering in recent weeks, as nervousness over lofty valuations of big U.S. tech companies has spooked investors.

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Despite those fears creeping into markets, the survey showed that fund managers are at their most bullish since mid-2021, according to a measure calculated using cash levels, equity allocations and global growth expectations.

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“Investors are clearly more positive into 2026 and positioning has moved higher,” said Emmanuel Cau, head of European equities strategy at Barclays. “The bar for positive surprises has likely moved higher,” he added.

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The Bank of America measure of optimism exceeds even the heights of the “Trump trade” at the end of 2024, as investors piled into U.S. stocks and the dollar in anticipation of a market-friendly presidency. Expectations of global corporate profits, too, are at their highest level since 2021 — highlighting the role of strong earnings growth in fuelling investor bullishness.

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“The market is definitely bulled up,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management. “After a year of having all kinds of policy uncertainties, and a big stagflation scare which has now faded, investors are looking ahead…When I look ahead, I want to err on the side of being more constructive.”

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The possibility of an “AI bubble” remained the biggest market risk identified by investors in December, although the proportion of managers naming it as their top risk dropped from 45 per cent in November to 38 per cent in December.