Global investors began the year drunk on booming growth, \u200brecord stocks and tech euphoria. Despite Wednesday\u2019s U-turn on the Greenland row, U.S. President Donald \u200dTrump\u2019s erratic tariff threats should prompt investors to question some of that extreme optimism.<\/p>\n
This week\u2019s sudden market disturbance hinged on fears of escalating transatlantic trade tensions after Trump threatened more tariffs on Europe unless the U.S. was allowed to take over Danish-controlled Greenland. Europe balked at the move, vowing retaliation for any related tariffs.<\/p>\n
With perhaps half an eye on the resulting debt market jolt at \u200dhome, Trump \u200babruptly stepped back late Wednesday from the tariff threat, just four days after he announced it – claiming NATO assurances on Greenland security.<\/p>\n
But the prospect of another year of such brinkmanship and repeated sideswipes at international alliances and trade relations may yet prompt a more careful approach to the overwhelming market consensus that greeted the year.<\/p>\n
Bank of America conducted its first monthly global funds survey of 2026 just before the Greenland row blew up last weekend. Even so, the results revealed how extreme market positioning and thinking were as the year kicked off.<\/p>\n
Often viewed as a contrarian signal, the BofA readout on the survey said \u2060it was the most bullish in almost five years – even though U.S. and global stocks are already at record highs.<\/p>\n
With about half of all investors polled seeing a \u201cno landing\u201d for the world economy over the next 12 months – as opposed to a soft or hard landing – global growth optimism was at its highest since July 2021. Funds expecting a global economic \u201cboom\u201d this year were at their highest in four years as well.<\/p>\n
That\u2019s no finger in the wind. In the middle of the Greenland maelstrom, the International Monetary Fund on Monday once again pushed up its global growth forecast for 2026 to 3.3 per cent – \u200cas fast as it\u2019s been in three years and \u200dwith little or no slowdown seen in 2027. And some estimates of the U.S. economy are pointing to annualized growth north of 5 per cent in the final quarter of \u200dlast year.<\/p>\n
That macro view was amply reflected in the survey\u2019s relative asset holdings, with the net \u200cnumber of funds overweight stocks also close to 50 per cent and the highest since just after the U.S. election in late 2024. Overweight holdings of commodities \u2060were their highest in more than three years and cyclical bank stocks were the most favored sector.<\/p>\n
Cash levels had never been lower in the 25 years or so of the survey, putting BofA\u2019s overall bull-and-bear gauge \u200bat what it called \u201chyper bull\u201d – a reading that it says warrants an increase in risk hedges and safe havens.<\/p>\n
Most alarming for contrarians is that almost half of the funds surveyed have not taken out protection against a big stock drawdown over the next three months – the biggest hedge-less count in eight years.<\/p>\n
But this is where the picture gets complicated.<\/p>\n
Even though cash levels are historically low, investors clearly identified \u201cgeopolitical conflict\u201d as the biggest tail risk and portfolios are already brimming with gold to reflect that – so much so that funds identified \u201clong gold\u201d as the most crowded trade in the Street \u200bas the precious metal continues soaring to new records.<\/p>\n
What\u2019s more, one potential transmission mechanism of any renewed row with Europe over Greenland is via the bond markets. The prospect of another Trump tariff salvo potentially irks the U.S. inflation picture again, and any retaliation from Europe could even put gigantic European holdings of U.S. Treasuries in the crosshairs.<\/p>\n
But due largely to their take on blistering world growth, funds are already more underweight bonds than they have been at any point since September 2022 and more than 50% of global investors still think the dollar is overvalued after its losses last year.<\/p>\n
Fragile bond markets could well be the route to wider market disturbance, but at least asset managers are already shy of fixed income to account for some of that.<\/p>\n
Long-standing fears of an artificial-intelligence bubble burst may \u2060be more impactful. But, even here, the alarm bells seem to have quietened somewhat.<\/p>\n
The IMF\u2019s global economic update seemed relatively sanguine about the durability of elevated tech valuations, citing models that suggest \u2060broad equity index overvaluation is still half that at the peak of the dotcom bubble in 2000.<\/p>\n
However, the IMF did flag that any AI-related earnings disappointment or sudden correction in U.S. megacap tech stocks could be cause for concern \u200cfor the world economy at large.<\/p>\n
\u201cGiven the decade-long increase in foreign ownership of U.S. equities, this sharp correction could also trigger sizable wealth losses outside the United States and exert a drag on consumption, spreading the downturn more globally,\u201d it wrote.<\/p>\n
And it\u2019s the stability of historically unprecedented foreign ownership of U.S. equities and bonds that\u2019s increasingly being cited as the biggest risk to this year\u2019s outlook – from many angles.<\/p>\n
A confluence of AI and tech risks with any fracturing of world relations would scare the horses – and the \u201chyper bull.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Global investors began the year drunk on booming growth, \u200brecord stocks and tech euphoria. Despite Wednesday\u2019s U-turn on…\n","protected":false},"author":2,"featured_media":425999,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[901,888,902,879,877,903,45,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-425998","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-alberta","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-business","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/425998","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=425998"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/425998\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/425999"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=425998"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=425998"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=425998"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}