Dear Reader,
Good morning.
Simmy Adelman here with Behind the Markets.
I read something very interesting yesterday that I wanted to share with you.
Bank of America just released its July Global Fund Manager Survey.
210 fund managers.
$555 billion in assets under management.
And what they found is one of the most fascinating contradictions I've seen in years.
The Contradiction That Should Scare You
Investor sentiment just hit its highest level since February.
Cash allocations fell to 3.6%.
To put that in context, when fund managers hold this little cash, it means they've already deployed almost everything they have into the market.
There's almost no dry powder left.
And historically, every time cash has fallen this low, stocks have declined over the following two weeks.
Why?
Not because they're predicting a crash, but because there's almost nobody left to buy!
A record 54% of respondents expect the economy to keep growing with no recession in sight — what economists call a 'no landing' scenario.
In other words, the plane never comes down
US equities are at their highest overweight positioning in 18 months.
By every measure, fund managers are all in.
And yet.
45% of those same fund managers just identified the AI bubble as the single biggest tail risk in the market.
That's up from 28% last month.
For the first time ever, the AI bubble has overtaken second-wave inflation as the number one concern.
82% called "long semiconductors" the most crowded trade in the market — a record high.
Meaning, everyone and their mother is already in semiconductor stocks.
A crowded trade is dangerous for one simple reason: if everyone is already in, there's nobody left to buy. And when something goes wrong, like IBM's warning, everyone tries to exit at the same time through a very small door.
And when asked directly whether AI stocks are in a bubble, 43% said yes.
48% said no.
The market is almost perfectly split.
Nobody Is Actually Selling
Here is the part that really gets me.
Despite all of that worry, fund managers only modestly trimmed their tech positions.
Nobody is shorting at scale.
Nobody is running for the exits.
They're nervous.
They're talking about bubbles.
But they're staying fully invested anyway.
One survey summary described it perfectly: "verbal worry but physical compliance."
Cash is at record lows. The sell signal is flashing. And the party goes on.
This Is Just Human Nature
This isn't surprising if you've been around markets long enough.
This is what happens at every major top.
Everyone can smell something is off.
The valuations feel stretched.
The crowding feels extreme.
But nobody wants to be the first one to leave the party.
Because what if it keeps going?
What if the music doesn't stop for another two years?
The fear of missing out is more powerful than the fear of losing money — right up until it isn't.
This is the most dangerous moment in any market cycle.
Not when everyone is panicking.
When everyone is nervous but nobody is moving.
This Is Exactly Why We're Here
This is why I’m glad you’re a subscriber to Behind the Markets.
Because Dylan created this for moments like this.
Not to tell you the sky is falling.
Not to tell you everything is fine.
But to cut through the noise and help you see clearly when the market is making it very hard to do that.
That’s how we’ve avoided riding stocks to the top, just to ride them back down again.
It’s how Takeover Targets members locked in gains like 200%... 172%... And 73% - all is this last month alone.
Our next Takeover Target is being released at 2pm today.
The data this week has been telling a consistent story.
Hedge funds selling tech at the fastest pace since 2016.
IBM's worst day since 1987 as AI hardware budgets eat software budgets alive.
And now 210 of the world's most sophisticated investors admitting they're scared — and staying invested anyway.
That is a lot of signal in a short period of time.
Our playbook for moments like this is clear.
Sell your most speculative positions.
Move cash into short duration money markets.
Build your shopping list.
And get ready to pounce when the real opportunity arrives.
We'll be right here guiding you through every step of it.
Have a wonderful Thursday.
All the best,
Simmy Adelman, Editor-in-Chief
Behind the Markets
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Written by Simcha Adelman