Bull markets climb a wall of worry, so bearish positioning has been a “strong tailwind” for stocks in 2023, but that’s no longer the case. So says Bank of America’s (BofA) latest monthly fund manager survey, with bearishness falling to its lowest level since February 2022. Three out of four expect a soft or no economic landing.

Earnings optimism is the highest in 18 months. The percentage of fund managers underweighting stocks is the lowest in 16 months, while technology stock allocations have hit their highest level since December 2021. Cash allocations have fallen sharply, from 5.3 to 4.8 per cent. That’s a 21-month low, and means BofA’s cash rule is no longer in buy signal territory (above 5 per cent).

[ Bull market passes the duck testOpens in new window ]

[ Hints of exuberance among ordinary investorsOpens in new window ]

Still, investors are far from exuberant. Cash allocations remain well above the 4.0 level that would trigger a contrarian sell signal. While recession expectations have eased, only four in 10 see a recession as unlikely. Risk appetite has increased but remains low. Indeed, it’s in line with February 2023′s survey, after which stocks gained for five consecutive months. Equity allocations remain well below historical norms. In summary, fund managers are no longer bearish but nor are they bullish, with sentiment in neutral territory right now.