• Investor sentiment shifts dramatically, with a net 2% now expecting global inflation to ease over the next 12 months
  • This marks the first time since February that fund managers anticipate slowing inflation
  • Growing optimism for a 'soft landing' emerges as cash levels drop to a 'sell signal' threshold

A significant shift in inflation expectations is underway among global investors, according to Bank of America's November fund manager survey. For the first time since February, a net 2% of respondents now anticipate global inflation will ease over the next twelve months, reversing sharply from the net 24% who expected accelerating inflation just one month earlier.

The dramatic flip in sentiment comes as recent economic data shows consumer prices rising more slowly and follows the Federal Reserve's initial rate cuts in late 2025. According to people familiar with the survey results, the change reflects growing confidence that central banks are gaining control over price pressures without triggering a severe economic downturn.

"We're seeing the most optimism about a soft landing we've witnessed all year," said one source close to the survey findings, noting that 53% of managers now expect this favorable economic scenario. The survey, which polls hundreds of fund managers overseeing nearly $700 billion in assets, serves as a key barometer for institutional sentiment.

Market positioning has shifted accordingly, with stock allocations reaching their most overweight position since early 2025. However, the survey also revealed potential warning signs—cash levels have dropped to what BofA considers a "sell signal" threshold, suggesting markets may be overextended and vulnerable to corrections if anticipated rate cuts don't materialize.

Bank of America representatives declined to comment beyond the published survey results when reached Tuesday morning. Several fund managers contacted separately described the inflation outlook as "at a crossroads," with current market pricing dependent on continued monetary easing.

The changing inflation expectations have already influenced sector allocations, with investors rotating away from technology and consumer stocks toward healthcare, emerging markets, and banking sectors. Concerns about an "AI bubble" and overinvestment in certain tech segments were frequently cited by survey respondents as potential risks.

Correction: An earlier version of this article misstated the percentage of managers expecting a soft landing. The correct figure is 53%, not 52%.