Everyday investors and big institutions are divided on the future of the stock market

• Bullishness is rising among fund managers surveyed by Bank of America.
• But everyday investors are the most bearish since 2023, according to AAII.
• Big institutions are especially upbeat about international markets.

Retail investors and fund managers are watching the same stock market, but they’re seeing two different things.

According to the latest Bank of America survey, risk appetite among big investors has reached a 15-year high, with cash levels plunging to the lowest level since 2010. 35% of managers are “overweight” stocks relative to other investments, and 34% consider global equities to be this year’s best-performing asset class.

That optimism is harder to find among everyday traders.

The latest survey from the American Association of Individual Investors shows that 47.3% of investors express a bearish outlook for the next six months. This is “unusually high” and near levels not seen since late 2023.

While the S&P 500 soared around 25% in the year that followed, investors are facing fresh challenges in 2025, ranging from policy disruptions to an inflationary rebound.

For instance, 57.4% of respondents to last week’s AAII survey anticipate that US tariffs will slow growth and increase prices. The Trump administration has made protectionist policy a key piece of its agenda, prompting a wave of uncertainty that has rocked markets in recent weeks. Wall Street has cautioned that a tit-for-tat trade conflict could result in an earnings hit among S&P firms.

While a trade war has also become the top concern among fund managers, it is seen as no more than a tail risk, BofA wrote. Fear that reciprocal tariffs trigger a global recession stands at 39%.

Otherwise, managers have a lot to be upbeat about. Generally, global recession expectations are at a three-year low, and 77% of respondents are still gearing for US interest rate cuts this year.

Investor optimism rose from 6.1 to 6.4 in February, signaling an uptrend that’s still below December’s “frothy” levels.

To be sure, perceptions have shifted around how US stocks stack up against international markets. While big institutions are still eager for stock exposure, 89% see US equities as overvalued — the most since 2001.

With exposure to US tech mega-caps deemed to be the market’s most crowded trade, BofA respondents expect the EuroStoxx index to outperform the Nasdaq in 2025. Meanwhile, optimism is rising about China’s growth accelerating this year.