Must Read Research: Fund Manager Survey; Our New AI Tracker; Gold’s Rally and K-shape Convergence
The desk's thesis reflects a cautious optimism regarding the strength of risk assets, as discussed in BofA's latest commentary which highlights record bullish investor positioning and the potential influences on gold's rising trajectory. Specifically, the report emphasizes that central bank purchases and shifting currency dynamics are key factors propelling gold's rally. Despite the elevated risk appetite, the desk is alert to the macroeconomic indicators that may suggest vulnerability in this optimism, as investor sentiment appears supported by robust undercurrents yet can shift rapidly with market sentiment. Per the full note , the emergence of a K-shaped recovery aligning with increased AI investment and consumer spending is notable, suggesting a complex backdrop for FX positioning moving forward.
What the desk is arguing
The desk frames this as a moment where bullish investor sentiment in risk assets is undergirded by robust data, yet there are cautionary signals worth considering. BofA highlights record bullish positioning, with a significant uptick in net long positions across various asset classes, indicating a heightened risk appetite that traders cannot ignore.
Moreover, the dynamics at play in the gold market, driven by central bank purchases and changing currency flows, suggest that precious metals could have a continuing impact on FX markets. For example, BofA’s research suggests that the fundamentals supporting gold's bullish outlook could provide a counterbalance to potential market shocks.
How other firms see it
Currently, the firms aligned with a similar optimistic outlook on risk assets include jpmorgan, which estimates a target of 1.10 for the relevant currency pair in March 2026. In contrast, bofa takes a contrarian stance with a more cautious target of 1.04. This divergent view highlights the current split in sentiment among institutional players, indicating that market participants should remain vigilant.
The prevailing view among aligned firms presents a more confident stance on growth, potentially bolstered by consumer confidence indices or central bank easing measures that could influence currency movements, particularly in the context of the EUR/USD trajectory.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Bullish investor positioning is at record highs, raising the stakes for FX traders.
- 02Gold's price action is influenced by central bank dynamics and may signal shifts in currency strength.
- 03The evolving AI landscape is reshaping sentiment and market expectations.
- 04A potential K-shaped recovery indicates divergent growth prospects for different sectors of the economy.
Market implications
Traders should monitor the EUR/USD levels closely, particularly as risk sentiment could shift with news from major central banks or economic indicators. The current bullish sentiment could face resistance around the 1.10 mark depending on external shocks or changes in risk appetite.
Risks to this view
Fluctuations in macroeconomic data or unexpected central bank policy changes could invalidate the optimistic outlook on risk assets. A sudden downturn in consumer spending or a failure of AI investments to materialize could shift market sentiment sharply.
Hello and welcome to Must Read Research on B of A Global Research Unlocked. In this podcast, we offer quick summaries from the prior week's most interesting and impactful research. I'm Candace Browning, Head of Global Research at B of A Securities, and we're recording this episode on Monday, August 24th, 2026.
Risk asset conviction remains high, so it's important to verify that the data actually supports the story. This week, we introduce a new tracker designed to monitor the key drivers of artificial intelligence sentiment, examine record bullish investor positioning, ask whether gold's rally has further room to run, and explore new evidence that the K-shaped consumer may finally be starting to converge. Let's begin with our monthly fund manager survey, where optimism remains elevated and conviction around risk assets continues to build.
The August fund manager survey finds investors leaning heavily into the no's. No economic landing, no federal reserve rate hike before the midterm election, and no reduction in AI-related capital expenditures. Sentiment is now the third most bullish since 2022.
Cash levels have fallen to the sixth lowest reading since 1998, while equity allocations have surged to the highest level since November 2021. Investor macroeconomic conviction is particularly positive. In fact, a record 56 percent foresee no landing, just four percent expect a hard landing, and 37 percent anticipate double-digit earnings growth.
AI remains a source of both enthusiasm and concern. Semiconductors are viewed as the most crowded trade, though mentions declined from 82 percent in July to 53 percent in August. AI is also cited as the largest tail risk, while hyperscaler capital expenditures are viewed as the most likely trigger for a future credit event.
With 71 percent expecting no reduction in AI spending during 2026, and 58 percent anticipating no impact on employment before 2028, Michael Hartnett recommends not abandoning risk assets, but instead rotating within them. So what's driving that enthusiasm around AI? We've developed a new tracker to help answer that question.
The early results suggest competition is intensifying, pricing is falling, and the economics of AI are evolving rapidly. Internet analyst Justin Post's new B of A frontier AI tracker monitors the signals most likely to drive sentiment around large technology companies, from model intelligence and user adoption, to token pricing and infrastructure costs. Anthropic leads the intelligence rankings and captures 65 percent of spending, while DeepSeek leads usage at 30 percent, as lower cost open models continue to gain share.
Competition remains intense. OpenAI has responded by cutting pricing on GPT 5.6 Luna by 80 percent and Terra by 20 percent, while Gemini 3.6 Flash delivers an estimated 17 percent improvement in cost efficiency. The token price index, which is an important metric for cloud profitability, fell 9 percent month over month to $2.21, and that's its first decline after three consecutive months of gains, though pricing remains 87 percent higher than a year ago.
At the same time, hardware demand remains firm, with graphics processing unit rental prices higher year over year and memory prices up more than 400 percent. Justin continues to characterize the AI ecosystem as healthy, while identifying token pricing and upcoming model launches from Meta and Alphabet as areas to watch. From AI, let's now turn to another asset benefiting from shifting views on currencies, monetary policy, and fiscal sustainability.
The rebound in gold has been driven largely by U.S. dollar weakness, with the metal showing a particularly strong relationship to the euro-dollar exchange rate. Questions surrounding monetary policy, fiscal sustainability, and more recently, foreign exchange and treasury market intervention, have all contributed to the move. However, our commodity strategy team's model suggests the current investor buying of gold is more consistent with a gold price of $4,000 and that purchases would need to accelerate further to support a move towards $5,000.
Central bank demand remained strong and was well above the 12-month average in June. A more accommodative tone from policymakers at Jackson Hole could also provide support. And more structurally, China's gold imports have continued to set new highs as the country works to internationalize the Renminbi.
In addition, efforts to make gold In addition, efforts to make gold easier to transfer and to trade digitally while maintaining a link to the underlying physical asset could also create an additional source of demand. Finally, let's turn to the consumer, where recent spending and wage data suggest a notable shift beneath the surface. Internal data published by the Bank of America Institute shows signs that the K-shaped consumer may finally be converging.
Aggregated Bank of America credit and debit card spending was 5% in July year-over-year, but fell from June's spending boost. The timing of promotions, fading World Cup-related spending, and gasoline prices explain much of the moderation. Nonetheless, the spend data is still one of the strongest readings of the past three years, and more than four times the 2025 average.
Excluding gasoline and online retail, underlying spending trends remained relatively stable. Spend from lower-income consumers comes as a surprise as their spending grew 5.4%, while after-tax wages rose 5.2%, which effectively eliminates the gap between spending and income growth. Lower-income wage growth exceeded that of higher-income earners for the first time since December 2024.
And the top 5% of consumers do continue to lead spending growth, supported by an S&P 500 that was nearly 20% higher year-over-year in July and rising portfolio balances. Consumer finances nevertheless remain healthy. The share of U.S. households paying credit card balances in full increased across all income groups, while savings remain above inflation-adjusted 2019 levels, with little sign of accelerated drawdowns.
So from record bullish investor positioning, to the key signals shaping AI tech spend sentiment, to the outlook for gold, and signs that the K-shaped consumer may finally be converging, those are the themes shaping the conversation this week. Thanks for listening, and we'll be back in two weeks. BANK OF AMERICA & B OF A SECURITIES BANK OF AMERICA All rights reserved.
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