Investors Remain Bullish on Stocks Despite Rising Yields and Oil Prices

Global equity markets are displaying remarkable resilience in the face of mounting macroeconomic headwinds, including surging bond yields and elevated energy costs. Despite the 10-year Treasury yield crossing the significant 5% threshold and oil prices holding firm above $100 per barrel due to supply disruptions related to the conflict in Iran, investors continue to show strong confidence in stock market returns.

According to Bank of America’s latest Global Fund Manager Survey, released Tuesday, money managers remain heavily allocated to global equities. The survey, which polled 170 investors managing a combined $470 billion in assets, found that 49% of respondents were overweight stocks in September. While this represents a slight decrease from the “excess bullishness” observed during the summer, equities remain the most popular asset class among institutional investors.

The S&P 500 has gained more than 10.8% year-to-date, outperforming other asset classes despite recent volatility. The tech-heavy Nasdaq Composite has climbed 11.8%, while the Dow Jones Industrial Average has risen 8.4%. International markets have also participated in the rally, with indices in South Korea, Japan, and Europe posting gains.

Earnings expectations remain robust, with the survey indicating that projections for double-digit earnings-per-share growth over the next 12 months are at their highest level since August 2021. Additionally, 38% of respondents anticipate a global economic “boom” in the coming year. Conversely, allocations to bonds have dropped to their lowest point since May 2022.

Optimism is largely driven by continued heavy spending on artificial intelligence. Even as prominent figures in the tech industry warned earlier this week that AI development is outpacing safety safeguards, major financial institutions like BlackRock and UBS maintain that AI investment will sustain corporate growth and support equity valuations in the near term.