Global investor sentiment has plunged to its most bearish level since June 2025, yet emerging markets are providing a crucial bright spot.
According to the April 2026 Bank of America (BofA) Global Fund Manager Survey - which polled panellists managing $563 billion in assets - institutional investors are heavily favouring developing economies amidst the global gloom.
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The Emerging Market Exception
While the broader mood dictates caution, money managers are aggressively targeting EM assets. In absolute positioning terms, investors are currently most overweight on emerging markets, ranking the segment above cash and commodities.
Investors remain very long on EM stocks, maintaining an allocation that sits a full standard deviation above its long-term average.
Retreat from Wall Street
This robust EM positioning contrasts sharply with the broader global equity outlook. Overall global equity allocation dropped to a net 13% overweight from 37% just a month prior, marking the lowest global equity exposure since July 2025.
Furthermore, fund managers are deliberately avoiding American shares.
Investors are currently a net 10% underweight on US equities, keeping allocations 0.4 standard deviations below historical norms. In response to rising risks, average cash balances have been maintained at 4.3%, the highest level recorded since May 2025.
Stagflation Fears and Tail Risks
The pivot towards emerging markets is happening against a grim macroeconomic backdrop. The survey highlights that 76% of investors now expect 'stagflation'-an environment of below-trend growth coupled with above-trend inflation.
Expectations for a stronger global economy have collapsed to -36%, while 69% of respondents foresee higher global consumer prices over the next 12 months.
Compounding the economic pessimism are geopolitical anxieties. Geopolitical conflict is now cited as the biggest tail risk by 44% of investors, a sharp escalation from 37% last month.
Consequently, 'long oil' and 'long global semiconductors' are currently tied as the most crowded trades on Wall Street, each capturing 24% of investor focus.
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