Bank of America said in its Oct. 15, 2026 fund flow report that its Bull & Bear Indicator fell from 8.1 to 7.4, ending the sell signal that had been in place since May 26 after the gauge moved back below 8.0. The bank said extreme optimism is fading, but flow data still does not show investors materially underweight risk assets. Its near-term stance remains cautious for the next three to four weeks.
Bull & Bear Indicator drops below the sell threshold
BofA said the move lower was driven by deteriorating global equity breadth, hedge fund short positioning in crude oil and S&P 500 futures, cooler positioning in gold futures, and weaker flows into high-yield and emerging-market debt. Strong inflows into technology funds partly offset those pressures.
During the sell-signal period that began on May 26, the S&P 500 rose 3.0% with a maximum drawdown of 4.5%. The Nasdaq 100 fell 0.2% with a maximum drawdown of 11.3%. The MSCI World Index gained 1.1% with a maximum drawdown of 4.4%, while high-yield bond ETFs fell 4.1% with a maximum drawdown of 4.7%.
BofA also said its old Bull & Bear Indicator slipped from 5.6 to 5.1 after peaking at 8.0 on Sept. 1.
Under the bank’s breadth rule, a net 52% of global equity indexes are now oversold, the highest share since April 2025. A buy signal for risk assets would be triggered if a net 88% of markets fell below their 50-day and 200-day moving averages. BofA said that looks difficult in the short term unless overbought indexes in the U.S., Taiwan, and Brazil fall another 6% to 10%.
Equity inflows stay strong, led by technology funds
Equity funds took in $64.5 billion in one week. ETFs brought in $73.2 billion, while mutual funds saw $8.6 billion in outflows. Global equity inflows were running at an annualized $1.3 trillion, a record in the report. U.S. equities were running at an annualized $636 billion, investment-grade bonds at an annualized $480 billion, technology funds at an annualized $196 billion, and South Korean equities at an annualized $76 billion. Consumer funds, by contrast, were seeing annualized outflows of $18 billion, also a record.
BofA separately highlighted the $196 billion inflow into technology funds, the $636 billion into U.S. equities, and the $1.3 trillion into global equities. South Korean stocks drew $76 billion even though the KOSPI had fallen 30% from its June peak. Since the August peak, only $5 out of every $100 of inflows had left, according to the report.
Bond funds took in $11.8 billion, extending their inflow streak to 77 straight weeks. Treasuries added $3.6 billion for a 16th consecutive week of inflows, the longest run since August 2024. Investment-grade bonds added $3.5 billion, with annualized inflows at a record $480 billion. High-yield bonds lost $900 million for a third straight week of outflows. Emerging-market debt added $800 million for an 11th consecutive week, and municipal bonds added $4.5 billion for a 26th straight week.
Private clients hold record equity allocations
BofA said its private clients oversee $4.7 trillion in assets. Their equity allocation rose to a record 66.4%, bond allocation stood at 17.1% near historical lows, and cash allocation fell to a record low 9.3%. The bank said private clients are still adding to equities, with equity ETF holdings up 0.2% over the past week and up 8.0% year to date.
Bond holdings have started to rise. Holdings of U.S. Treasuries with maturities of two to 10 years increased by $11 billion, while short-dated Treasuries have risen by $4.5 billion since June.
Over the past four weeks, private clients bought municipal bonds, bank loans, and industrial ETFs, while selling consumer staples, emerging-market debt, and consumer discretionary ETFs. BofA said the positioning shows record equity exposure, bond allocations near historical lows, and record-low cash levels, leaving risk-asset positioning stretched.
Equity ETFs account for 21% of private client assets, while debt ETFs account for 19%. Debt allocation at 17% is below the long-term average of 25%, and cash at 9% is below the long-term average of 12%. BofA said the mix points to high risk appetite, though bond allocations have begun to recover.
BofA keeps a defensive view for the next three to four weeks
BofA said it prefers a defensive stance over the next three to four weeks even after the sell signal ended. The bank cited 3% real yields, expectations for a Federal Reserve rate hike on Oct. 28, U.S. tensions involving Iran and the Russia-Ukraine war, oil prices, the risk of a Democratic sweep in the midterm elections, and price action among AI spenders and lenders.
The bank said a Fed rate hike in October could restore credibility and help push long-end Treasury yields another 20 basis points lower, limiting downside in risk assets, provided concerns over AI financing ease.
BofA also said there are no major new frictions between China and the U.S. after the midterm elections, and that meetings between Chinese and U.S. leaders are scheduled for Nov. 18 at APEC in Shenzhen and Dec. 14 at the G20 in Miami. The bank increased exposure to beneficiaries of peak yields, including small caps, REITs, and consumer discretionary.
Its October fund manager survey showed investors are at their lowest allocation to consumer discretionary since July 2008. At the same time, BofA did not add to technology because the same October survey showed investors are at their biggest overweight in tech since August 2020, while an "AI bubble in 2027" has become a consensus view.
Long-term positioning favors gold, commodities, and emerging markets
For long-term asset allocation, BofA said it is long gold, commodities, and emerging markets, and recommends reducing bonds and structural underweights to China. The bank said macro conditions and markets in 2027 will be driven by AI, with semiconductor prices serving as a key signal.
According to the report, rising semiconductor prices would support a bullish view and suggest the AI spending arms race is continuing. Falling semiconductor prices would point to tighter AI credit, a peak in AI capital expenditure growth, and 2027 nominal GDP coming in below expectations. In that case, asset returns would be driven more by income, with less contribution from capital appreciation.
Report conclusion and disclaimer
Overall, BofA said the sell signal has ended, but the cooling of extreme optimism will take time. Equity inflows remain at record levels, private client equity allocations are at records, and risk-asset positioning is still elevated. On that basis, the bank recommends caution in the short term, adding small caps, REITs, and consumer discretionary after the midterm elections, and staying long gold, commodities, and emerging markets over the longer run.
The original Chinese article said the piece was a整理与解读 of a third-party broker report from Bank of America dated Oct. 15, 2026, combined with public market information. It also said that ratings, target prices, earnings forecasts, and related judgments cited in the text reflect the views of the broker’s analysts and their institution only, do not represent the publisher’s view, and do not constitute investment advice.
The article also carried a risk warning stating that markets involve risk, decisions should be made independently, and the text should not be used as a basis for buying or selling any security.
