Fund Managers’ Average Cash Holdings Plunge to New Record Lows 

According to the latest Bank of America Global Fund Manager Survey covering responses from managers overseeing hundreds of billions in assets, fund managers’ average cash holdings have plunged to new record lows.

In the December 2025 survey, cash levels dropped to 3.3% of assets under management (AUM), the lowest since the survey began in the late 1990s, down from 3.7% in November. This trend continued into January 2026, with the most recent data showing cash allocation falling further to 3.2% — marking an all-time low and one of the fastest declines on record, a -1.6 percentage point drop since April 2025 in some reports.

This extreme low positioning reflects intense bullish sentiment: Fund managers are the most bullish since July 2021. Global growth expectations are at their highest since 2021. Equity allocations are high with many overweight stocks, while downside protection hedging against sharp equity falls is at its lowest since early 2018 — nearly half of respondents have no hedges in place.

BOFA’S BROADER SENTIMENT INDICATORS HAVE REACHED “HYPER-BULL” TERRITORY, WITH THE BULL & BEAR INDICATOR SURGING AMID MINIMAL “DRY POWDER” LEFT FOR BUYING DIPS. HISTORICALLY, SUCH ULTRA-LOW CASH LEVELS WELL BELOW THE LONG-TERM AVERAGE OF AROUND 4.8% OFTEN SIGNAL PEAK OPTIMISM AND HAVE PRECEDED MARKET VULNERABILITY OR CORRECTIONS — AS INVESTORS ARE ALREADY “ALL-IN” ON RISK ASSETS, LEAVING LITTLE BUFFER FOR SURPRISES.

BofA has noted this as a contrarian headwind for risk assets, with technical sell signals triggered (though their full indicator isn’t quite at max yet). This development has been widely discussed in financial media and on platforms like X, with analysts viewing it as a cautionary sign amid stretched valuations in equities.

The implications of fund managers’ cash allocations hitting all-time lows currently at 3.2% of AUM per the January 2026 Bank of America Global Fund Manager Survey are significant for markets, as this reflects extreme bullish positioning with very little “dry powder” left.

High conviction and momentum continuation: With cash so low, managers are heavily invested in equities , commodities, and risk assets. This “all-in” stance can fuel further upside as long as positive catalysts persist — such as strong global growth expectations (now at multi-year highs, with a “no landing” soft-landing consensus), sustained earnings, AI/productivity gains, or favorable policy shifts.

Limited selling pressure on dips: Low cash means fewer immediate sellers during minor pullbacks; instead, it can act as a support mechanism because participants are already fully exposed and may buy more aggressively to avoid missing out (FOMO). This has helped sustain rallies in similar environments historically.

The survey highlights liquidity as the best since 2021, reducing near-term fears of forced selling from margin calls or redemptions. With minimal cash buffers and hedging at 8-year lows nearly 50% of managers have no protection against sharp equity declines, any negative surprise — earnings misses, policy reversals, geopolitical events, inflation surprises, or Fed tightening signals — could trigger amplified downside.

Low cash leaves little room to buy dips without selling other assets, potentially creating a cascade of stop-losses, redemptions, and risk reduction. BofA and analysts view this as a classic headwind for risk assets. Historically: Cash levels below ~3.6-4% have preceded pullbacks or corrections (e.g., stocks fell an average -2% in the following month in similar prior instances since the late 1990s).

Extreme bullish sentiment (Bull & Bear Indicator at “hyper-bull” 9.4/10, sentiment composite at 8.1/10 — highest since 2021) often marks peaks in optimism, where markets become fragile because everyone’s already positioned for the good scenario.

Positioning is stretched — high equity allocations, low downside protection, and overcrowding in areas like AI/tech. If sentiment flips, unwinding could be disorderly due to the lack of sidelined capital to absorb sales.

In mid-cycle or late-bull phases, such extremes increase the odds of sharper swings. While not an immediate “top” signal (markets have climbed further after hitting lows in the past), it raises the asymmetry: upside requires fresh inflows or leverage, while downside can accelerate quickly.

This isn’t isolated — retail allocations are near highs, money market funds as % of S&P 500 market cap are historically low ~12.5%, and active funds face ongoing outflows. The market’s resilience so far relies on the “run-it-hot” narrative holding, but history shows that when conviction is this high and buffers this thin, corrections even mild ones can feel more severe.

Overall, it’s a classic contrarian caution flag amid euphoria: bullish for momentum chasers in the short term, but a setup that leaves markets exposed to reversals. Many analysts including BofA’s Michael Hartnett see it as the biggest headwind for risk right now, even if their full sell triggers aren’t fully lit yet.