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First Up

UPDATED 21/07/2026 09:30

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The ASX 200 slipped less than 0.1% on Monday after a promising start was snuffed out by heightened geopolitical uncertainty, which weighed on risk sentiment. The winners & losers on the main board were exactly evenly matched, a rare occurrence which, as a point of interest only occurs once in every 210 sessions according to Bloomberg – as we keep saying, the local market is rotating between stocks as opposed to moving in any clear direction.

Yesterday’s session saw buying return to the energy sector (+1.8%) while the tech sector (-1.6%) struggled, but one cease-fire post could turn the relative performance on its head.

While the fireworks around the aggressive correction in the “AI Trade” is dominating the financial press, the Bank of America Fund Managers Survey was released last week, providing an insight into market sentiment and positioning that we like to cover on a month-to-month basis. There were a few points in the survey that caught our eye:

Market sentiment is at a 5-month high and growth optimism a 4-year high, i.e. markets are still pricing in a rapid resolution to the US-Iran conflict.
Cash levels have fallen from 4.1% to 3.6%, the lowest reading since 2024 – if oil remains around US$90/barrel it’s going to be hard for indices to advance.
Exposure to US equities hit its highest level since late 2024, with a net 24% of managers expecting US stocks to outperform other regions — the third-highest US weighting in 5-years.
Managers cut allocations to UK equities to their lowest level since August 2020, a sharp contrast to the bullishness on US stocks.
Fund managers are underweight the consumer sectors (Staples + Discretionary) – the lowest level since 2006.
Conversely, fund managers increased healthcare and reduced energy & miners – similar to the ASX.

The cash levels are a concern, but the S&P 500 still advanced +16% through 2025 despite the Liberation Day hiccup – way above the average +9.3% return since the year 2000. Elsewhere, we have felt the switch out of the miners on the ASX, but at this stage it still feels like some profit-taking as the uncertainty around Iran resurfaces, plus the operational performance of some ASX miners has been average of late.

Overseas markets were soft overnight as geopolitical risks whipsawed the oil price. In Europe, the EURO STOXX 50 slipped 0.1% while the UK FTSE retreated a more meaningful 0.7%. In the US, the tech-based NASDAQ eked out a small gain while the Dow retreated by 0.6%.