Global fund managers have piled into commodities alongside fears the Iran war could spark a significant inflation surge, a closely followed monthly survey showed Tuesday. At the same time, investors are bullish on stocks and less concerned about the economic outlook, having also piled heavily into equities.
The BofA Global Fund Managers Survey for May found managers the fourth-most overweight commodities in the history of the series going back to 1999. BofA notes that the survey’s contrarian signals suggest managers might want to rein in that exposure somewhat.
The survey found fund managers’ commodities allocation is net 31% overweight in May, up from 20% overweight in April. That’s two standard deviations above the long-term average, BofA said. At the same time, managers reported a record rise in their equity allocation to 50% overweight from 13% in April, while slashing cash levels from 4.3% to 3.9%, driven by a surge in optimism over earnings and expectations the Federal Reserve will still deliver rate cuts despite concerns over inflation.
Based on survey positions relative to history, “contrarians would be covering shorts in bonds, US dollar, UK assets & consumer stocks, and paring length in commodities, stocks, EM (emerging-market) assets & tech/semis,” wrote BofA analysts led by Michael Hartnett.
Commodities are certainly enjoying a strong 2026. The Bloomberg Commodity Index is up nearly 30% year to date. Gold, silver and precious metals charged into the new year with a series of eye-popping new highs before running out of steam, but crude oil and fuel futures have surged since the start of the Iran war and the closure of the Strait of Hormuz. Agricultural commodities have joined the rally, and have been increasingly correlated with energy as those surging crude and product prices fuel demand for biofuels.
See: Biofuel bets meet rising food shortage fears after USDA slashes U.S. wheat crop forecast
And then there are inflation fears, which appear to have stoked interest in commodities as a broad asset class. Asked what the biggest tail risk is, 40% of investors said “2nd wave inflation,” up sharply from 26% last month.
When it comes to the Strait of Hormuz, 44% of managers said they expect the crucial waterway to reopen in June, while 22% said the third quarter and 10% said this month.
The survey found 69% of investors say they expect “stagflation” (below-trend growth and above-trend inflation), though that’s down from 76% in April. One in four expect a “boom” (above-trend growth and above-trend inflation), up from 15%. Two percent say “goldilocks” (above-trend growth and below-trend inflation), vs 4% a month ago, while 0% say “stagnation” (below-trend growth and below-trend inflation), from 1%.
When it comes to oil prices, the survey found investors expect oil to trade at a weighted average of $85 a barrel by year-end, a 39% increase from the $61 a barrel for Brent seen at the beginning of the year. A little over a quarter of investors expect oil to trade $90 a barrel or higher by year-end, with just 7% expecting oil to end the year above $100 a barrel. BofA analysts noted that 46% of managers believe oil is overvalued, the highest since August 2008.