Institutional investors are the most bullish since the February peak in stocks, and no longer think a trade war is the biggest risk out there

The trade war is over and risk appetite is high.

That’s the message from Bank of America’s September survey of fund managers with $426 billion in assets, who are collectively their most optimistic since February 2025 (an intermediate peak for the S&P 500).

Key to this view seems to be that investors have capitulated on the idea that higher prices on US imports and disruptions to cross-border trade are the top threat to economic activity. “Trade war triggers global recession” was deemed the No. 1 tail risk from the February through August surveys. It’s now No. 4, trailing a second wave of inflation, the loss of Fed independence/US dollar debasement, and a disorderly rise in bond yields.

Positioning among institutional investors is “starting to close the gap to retail investors’ stock allocation,” Bank of America Chief Investment Strategist Michael Hartnett wrote.

Implicit in this increasing bullishness is a desire for companies to take part in the AI boom and invest for growth and efficiency.

“Asked what companies should do with their cash flow, 39% of fund manager survey investors said they want companies to increase capital spending (the most since Dec’24) while 27% said they want companies to improve balance sheets (lowest since Feb’22),” Hartnett wrote.