US Dollar Underweight Hits 19-Year High as Investors Eye Soft Landing

In a recent assessment of global asset managers’ portfolios, a significant shift in sentiment towards the US dollar and American equities has been observed. Data compiled from a monthly survey indicates that bearish positions on the dollar have reached a level not seen in nearly two decades, while negative views on U.S. stocks are at a two-year high. This cautious stance, however, is juxtaposed with growing optimism regarding the potential for a favorable economic outcome.

According to information cited from a Bank of America report via Reuters, asset managers surveyed in May 2025 increased their “underweight” position in the US dollar to its highest point in 19 years. Being “underweight” in an asset means holding a lower proportion of it in a portfolio compared to a standard benchmark index. This typically suggests a pessimistic outlook among investors regarding that specific asset’s future performance.

One contributing factor cited for this increased caution towards U.S. assets, including currency and stocks, is related to the trade policies enacted by the current U.S. President, Donald Trump. The report suggests that these policies have influenced demand dynamics for American investments.

Prior to recent international discussions, particularly negotiations held in Geneva, investor mood was described as subdued, especially concerning assets in the United States. However, the atmosphere improved somewhat afterward. The survey results suggest that while sentiment wasn’t entirely bullish, it wasn’t as pessimistic as the preceding month, indicating a potential for modest gains if positive developments, such as a resolution or de-escalation of trade tensions between the U.S. and China, help avert an economic downturn. Notably, a temporary trade agreement was reached between the two nations, involving a substantial reduction in mutual tariffs for a period of 90 days. (It’s worth mentioning that Bitcoin experienced a price surge, breaking above the $105,000 mark, following news of this agreement).

Beyond the currency, the survey also highlighted a notable underweight stance on U.S. equities. The net underweight percentage for American stocks reached 38% in May, a 2% increase from April and representing a new peak for the past two years.

Despite the sustained underweight positions on the dollar and U.S. stocks, the overall confidence level among survey participants improved considerably. A significant majority, 61% of respondents, now anticipate a “soft landing” for the economy, a substantial rise from 37% in April. Conversely, the percentage expecting a “hard landing” decreased significantly, from 49% to 26%.

Further evidence of this shift in confidence comes from the allocation to cash within portfolios. The proportion of cash held by investors decreased from 4.8% to 4.5%. A reduction in cash holdings is often interpreted as a signal of increasing willingness to take on market risk, indicating greater confidence. The current cash level is below the average of 4.7% recorded over the period from 1999 to 2025.

The timing of the survey might help explain the nuanced picture, where pessimism towards specific assets coexists with rising overall economic optimism. Since the poll was largely conducted before the Geneva talks, many asset managers may have anticipated a worsening situation, leading to the observed underweight positions, even as subsequent events began to shift broader economic expectations.

The Bank of America survey included feedback from 208 respondents collectively managing assets totaling $522 billion. It’s relevant to note that in April 2025, the U.S. consumer confidence index hit a five-year low, and the expectations index also fell, pointing to growing concerns about a potential recession at that time.