Investors have poured into stocks and drained their cash reserves to the lowest point in more than two years, a positioning extreme that Bank of America says could set the stage for a market pullback as early as June, according to MarketWatch.
A BofA survey of fund managers found cash levels sitting at their lowest since February 2024. The firm identified the low cash reading as one sign that a summer swoon may be approaching. When investors are fully committed to equities and have little cash on the sidelines, there are fewer buyers left to push prices higher, and any shock can accelerate selling.
The warning comes against a backdrop of rising Treasury yields and elevated oil prices. West Texas Intermediate crude has been trading near $104 per barrel, and the 10-year Treasury yield has climbed to nearly 5%, close to a 12-month high. Higher financing costs squeeze corporate margins and make bonds a more competitive alternative to stocks for income-seeking investors.
Fund manager surveys are a widely used contrarian indicator. When professional investors are crowded into the same position, the risk of a sharp reversal grows. BofA's monthly survey has a track record of flagging turning points in investor sentiment before they show up in prices.
The firm stopped short of predicting a crash, but the combination of low cash, high valuations, and rising yields presents a set of conditions that has historically preceded periods of turbulence. Investors watching the calendar now have a specific window to monitor.
