Fund Managers Reduce Dollar Holdings as Trade Truce Eases Market Jitters

Global fund managers have lowered their exposure to the US dollar to the lowest level in 19 years, according to Bank of America’s latest global fund manager survey. The move comes amid concerns over the impact of the United States’ trade strategy, which had created uncertainty among investors.

Trade Tensions Shake Confidence

Before recent talks in Geneva between the US and China, investor confidence in US assets was weak. Many fund managers were cautious, mainly due to the unpredictable trade policy under President Donald Trump. At the time, around 37% of investors expected continued US tariffs on Chinese goods.

However, after the Geneva discussions, both countries agreed to a 90-day pause in trade hostilities. They also reduced reciprocal tariffs, easing fears of a major global economic slowdown.

Investor Sentiment Slightly Improves

According to Bank of America, while investor sentiment is still cautious, it has improved compared to April. Around 61% of fund managers now believe the global economy is headed for a “soft landing” — meaning it will slow down without slipping into a recession. This is a significant jump from just 37% last month.

Meanwhile, the number of fund managers expecting a “hard landing” — a more severe economic downturn — dropped to 26%, compared to 49% in April.

Biggest Dollar Underweight Since 2006

Despite the truce, investors are still avoiding the US dollar. The survey showed fund managers held their largest underweight position in the dollar since 2006. An “underweight” means they are holding less of an asset than they normally would.

This cautious approach toward the dollar suggests that many investors are still uncertain about US policy and its long-term economic impact.

Cash Levels Drop Slightly

In another sign of improving confidence, fund managers reduced their cash holdings from 4.8% to 4.5%. Lower cash holdings usually indicate that investors are becoming more willing to take risks and invest in markets.

Key Takeaways from the Bank of America Survey:

Biggest underweight on the US dollar since 2006

61% expect a soft landing, up from 37% in April

Only 26% now expect a hard landing, down from 49%

Cash levels fell from 4.8% to 4.5%

Trade truce between US and China helped reduce fears of recession

Conclusion:

The recent trade truce between the US and China has helped calm investor nerves, but many fund managers remain cautious. The shift away from the dollar and ongoing worries about global growth show that uncertainty still lingers in global markets.