How do Fund Managers see the market?

Since September the ASX200 has seen a significant divergence in performance between sectors. Materials and energy have delivered strong performance while IT, Healthcare and Consumer Discretionary stocks have sunk.

This is reflected in the Bank of America Fund Manager Survey (March 2026) which surveys 210 large Fund Managers every month. The survey once again confirms that Commodities are the trade to be in, with Overweight positions at levels not seen since 2022.

That demand of the big-money manager helps drive prices within a sector higher however when we hit points where all the managers are carrying net-overweight positions you also start to wonder "who is left to buy?". For this reason, when the Survey shows big overweight positions, you can bet you're nearing the top.

The last big overweight position was Gold & Silver in December/January. Overweight positions were over 50%. Gold has since underperformed.

The ongoings in the Middle East, as we noted last week, has understandably created a shift in Fund Managers thoughts. This is shown in their expectations for Global Growth with a significant reduction in Fund Managers expecting strong growth.

Skyrocketing oil prices are expected to have an impact (even if short-term) on corporate earnings and that has created a clear risk-off attitude with their reported cash positions increasing at the fastest rate since March 2020 (the Covid crash).

So, again we ask "what to do?"

This chart from Market Matters, shows a history of the market reaction when Wars have broken out.

It clearly highlights:

1. Oil price surges; and

2. markets fall.

   
   

I think it's safe to say 15% seems the mid-point.

Currently our market is down 7% so history would suggest there is a little further to go, but also, we're approaching the point where you can't get too fancy. Looking for another 2-3% down might mean you miss the subsequent up.

Finally, there is a little swing in perceptions from Fund-Manager I want to highlight from the areas they believe will outperform.

1. Value or Growth

There has been a noticeable drop in the number of Fund Managers believing Value stocks will outperform Growth stocks. Note growth stocks include the Big Tech companies which have all dragged (refer to the chart at the start showing underperformance of IT).

This would suggest they're starting to bottom-pick.

2. Large caps will Beat Small Caps

Smaller companies outperformed as Fund Managers cycled away from 'expensive' big tech (remembering that at the start of 2025 the crowded trade was Big Tech) looking for cheaper companies, mostly small caps.

Similar to the Value or Growth question, the swing is significant. Large Caps are the place to be. Sell Small, Buy Big.

To summarise, the war on Iran has certainly increased market jitters and history tells us we've probably not seen the bottom, yet, but it's important to note Wars rarely result in deep corrections so we must be preparing to make moves in the coming weeks.

We should note:

1. Fund Managers moved quick to free up cash. I'd probably expect the April report to suggest further increases however, they'll be quick to reverse on the first sign of deescalation.

2. Commodities remain their core trade. Is it crowded? It's certainly getting that way but it hasn't reached the levels of prior crowded trades.

3. It feels like the anti-large cap, anti-big tech trade is seeing the first signs of unwinding.