Bank of America Survey Shows Fifth Most Bearish Sentiment in 25 Years

Global Fund Managers Turn Sharply Bearish as Tech Allocations Hit Multi-Year Low, Historical Data Suggests Potential Rally Ahead

Three Key Facts

• Bank of America’s Global Fund Manager Survey from April 2025 recorded the fifth most bearish sentiment in 25 years, with the sentiment measure plummeting from 3.8 in March to 1.8 in April 2025
• Fund managers have reduced technology stock allocations to a net 17% underweight position, marking the lowest tech allocation since November 2022 and sitting more than two standard deviations below the 23-year average
• Historical data shows that when sentiment hits extreme lows, the S&P 500 has risen 90% of the time in the following six months, with average gains of 15.1% over six months and 22.3% over a full year

Introduction

Bank of America’s latest sentiment analysis reveals one of the most dramatic investor psychology shifts in recent memory. The firm’s Global Fund Manager Survey captured the fifth most bearish sentiment reading in 25 years, as market participants grapple with policy uncertainty and trade tensions.

According to Investing.com, Bank of America advises investors to follow prevailing sentiment trends until clear extremes of euphoria or panic emerge, acknowledging the effectiveness of aligning with market psychology. The current environment presents both significant challenges and potential opportunities for strategic investors.

Key Developments

The sentiment collapse stems largely from President Trump’s “Liberation Day” tariffs announced in April 2025. Global growth expectations have plummeted to 30-year lows, reflecting widespread concern about trade policy impacts.

Technology sector sentiment has experienced particularly sharp deterioration. Fund managers have pulled back significantly on tech stocks, creating the most underweight positioning since late 2022. This represents a stark reversal from previous optimism surrounding technology investments.

Regional sentiment patterns vary considerably across Asia. China’s Risk-Love index has tapered from two-year peaks as investors await trade deal clarity. India transitions from panic to neutral territory, while Korea shows modest improvement despite year-to-date gains.

Market Impact

The sentiment shift has created notable market distortions. Technology underweighting suggests potential value opportunities for contrarian investors, especially given historical rebound patterns following sentiment troughs.

Market broadening beyond mega-cap technology stocks indicates healthier dynamics despite overall bearish sentiment. This diversification pattern often precedes more sustainable market advances.

Currency and regional equity markets reflect these sentiment changes. Indonesia exits panic territory, which Bank of America considers promising for further gains. Conversely, Thailand descends back into panic due to weak investor confidence and limited catalysts.

Strategic Insights

Bank of America identifies five technology investment themes that can drive shareholder returns. Revenue growth enablement tops the list, focusing on using technology to boost asset yields and overall growth.

Fee income enhancement represents another key opportunity. Companies leveraging technology to increase fee income as a percentage of total revenue show stronger performance potential.

Cost optimization through technology implementation offers direct bottom-line benefits. Risk management and resilience capabilities have gained importance as cyber threats and system vulnerabilities increase. Technology function transformation rounds out the framework by improving engineering productivity and accelerating solution development.

Expert Opinions and Data

Bank of America’s research team emphasizes that sentiment often improves before fundamentals. They cite supportive macro trends including widespread monetary easing, with nearly 80% of major central banks reducing rates alongside diminished trade tensions.

The firm’s Global Risk-Love index currently sits in the 64th percentile, prompting recommendations to maintain constructive positioning until extreme optimism surfaces. This measured approach reflects the bank’s systematic approach to sentiment analysis.

Historical precedent supports contrarian positioning at current levels. Bank of America data shows consistent market rebounds following sentiment extremes, with success rates reaching 90% over six-month periods following major sentiment troughs.

Earlier forecasts from late 2024 presented markedly different outlooks. Fund managers overseeing $503 billion in assets predicted US equities would lead performance in 2025. The dramatic reversal highlights market psychology’s volatile nature and rapid response to policy developments.

Banks implementing technology strategies across multiple themes could potentially increase Return on Tangible Equity by three to four percentage points. This quantified benefit demonstrates technology’s measurable impact on financial performance metrics.

Conclusion

The extreme bearish sentiment documented by Bank of America likely represents overreaction to policy uncertainty rather than fundamental deterioration. Historical patterns suggest strong rebound potential when sentiment reaches such depressed levels.

Technology investment opportunities emerge from current underweighting, particularly for companies focused on productivity enhancement and risk management. The five strategic themes provide a framework for identifying value opportunities amid market pessimism.

Strategic positioning during sentiment extremes has historically rewarded patient investors. Current conditions present compelling risk-reward dynamics for those willing to act counter to prevailing market psychology.