Historical Pessimism About the Dollar According to BofA
Investors show record pessimism towards the US dollar, according to a Bank of America report. Geopolitical changes influence sentiment.
In May 2025, the underweight indicator against the US dollar in asset managers' portfolios (FMS) reached its highest level in 19 years. This was reported by Reuters, citing a Bank of America report.
It should be noted that the term underweight is used in reference to an asset whose share in portfolios is below the benchmark, according to Bankinter. Often, this indicates traders' pessimism towards a particular position.
Bank of America attributed this dynamic to US President Donald Trump's trade policy, which has affected demand for US equities and currency.
"Prior to Geneva, investor sentiment was gloomy, especially towards US assets. May's FMS index was not as bearish as April's, but enough to suggest that the pain trade will rise moderately, considering that a successful conclusion to the US-China trade war prevents a recession or credit event,' the bank said in the report.
The report refers to the agreement between USA and China to mutually reduce tariffs by a total of 115% over a 90-day period. As a reminder, Bitcoin reacted to this event with a rally, surpassing the $105,000 level.
The undervaluation of US equities is also evidenced by the fact that the net underweight indicator for this position reached 38% in May, up 2% from April. This is a new two-year high.
Underweight indicator for US equities. Source: BofA.
Despite some pessimism from investors, overall confidence has increased. 61% of respondents expect a "soft landing" for the economy (in April it was 37%), while 26% expect a "hard landing" (in April it was 49%).
Investor sentiment on the economy by month. Source: BofA.
In addition, the share of cash in investors' portfolios fell from 4.8 per cent to 4.5 per cent, a signal often interpreted as an increase in confidence in the markets. This is lower than the 4.7% average recorded between 1999 and 2025
Share of liquidity in FMS portfolios. Source: BofA.
Investor pessimism about the dollar and US equities may be due to the fact that the survey was conducted mainly before the Geneva talks. As a result, asset managers expected the situation to worsen further.
The survey involved 208 participants, with total assets under management (AUM) amounting to USD 522 billion.
It should be noted that in April 2025, the US consumer confidence index hit a five-year low. This, coupled with a drop in the expectations index, indicates growing concerns about a possible recession.
Investor sentiment worsens amid recession fears and geopolitical uncertainties
In addition, geopolitical tensions and uncertainty over upcoming interest rate decisions may have further fuelled investor caution. The shift away from liquidity and pessimism about US equities suggest a broader reallocation of assets, potentially towards safer or non-dollar-denominated investments.
According to analysts, although investor sentiment remains fragile, any positive developments - such as a resolution to the Geneva talks or clearer signals from the Federal Reserve - could quickly reverse current trends. Meanwhile, some investors are increasing exposure to gold, bonds and emerging markets as a hedge against volatility. Overall, market sentiment continues to be shaped by macroeconomic data and global political dynamics.
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In May 2025, the underweight indicator against the US dollar in asset managers' portfolios (FMS) reached its highest level in 19 years. This was reported by Reuters, citing a Bank of America report.
It should be noted that the term underweight is used in reference to an asset whose share in portfolios is below the benchmark, according to Bankinter. Often, this indicates traders' pessimism towards a particular position.
Bank of America attributed this dynamic to US President Donald Trump's trade policy, which has affected demand for US equities and currency.
The report refers to the agreement between USA and China to mutually reduce tariffs by a total of 115% over a 90-day period. As a reminder, Bitcoin reacted to this event with a rally, surpassing the $105,000 level.
The undervaluation of US equities is also evidenced by the fact that the net underweight indicator for this position reached 38% in May, up 2% from April. This is a new two-year high.
Despite some pessimism from investors, overall confidence has increased. 61% of respondents expect a "soft landing" for the economy (in April it was 37%), while 26% expect a "hard landing" (in April it was 49%).
In addition, the share of cash in investors' portfolios fell from 4.8 per cent to 4.5 per cent, a signal often interpreted as an increase in confidence in the markets. This is lower than the 4.7% average recorded between 1999 and 2025
Investor pessimism about the dollar and US equities may be due to the fact that the survey was conducted mainly before the Geneva talks. As a result, asset managers expected the situation to worsen further.
The survey involved 208 participants, with total assets under management (AUM) amounting to USD 522 billion.
It should be noted that in April 2025, the US consumer confidence index hit a five-year low. This, coupled with a drop in the expectations index, indicates growing concerns about a possible recession.
Investor sentiment worsens amid recession fears and geopolitical uncertainties
In addition, geopolitical tensions and uncertainty over upcoming interest rate decisions may have further fuelled investor caution. The shift away from liquidity and pessimism about US equities suggest a broader reallocation of assets, potentially towards safer or non-dollar-denominated investments.
According to analysts, although investor sentiment remains fragile, any positive developments - such as a resolution to the Geneva talks or clearer signals from the Federal Reserve - could quickly reverse current trends. Meanwhile, some investors are increasing exposure to gold, bonds and emerging markets as a hedge against volatility. Overall, market sentiment continues to be shaped by macroeconomic data and global political dynamics.
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