Investor sentiment toward the U.S. dollar has reached its most pessimistic level on record for the next 12 months, according to currency options traders and recent surveys. A Bank of America survey of 174 fund managers overseeing $458 billion in assets revealed that 20% were underweight the U.S. dollar, marking the lowest allocation in 19 years. Institutional investors also remain bearish on U.S. equities, with a net 38% underweight in early May, the lowest since May 2023 and comparable to levels seen before the 2008 financial crisis. Fund managers are currently overweight in utilities, bonds, European stocks, and bank stocks, while underweight in energy, U.S., global, technology, and emerging market stocks. Currency markets reflect this sentiment with the U.S. dollar weakening against the Japanese yen and Swiss franc, and systematic funds holding aggressive short positions on the Dollar Index (-3.27%). Meanwhile, long positions are building in the euro, British pound, Japanese yen, Australian dollar, and New Zealand dollar. BlackRock's recent tactical and strategic recommendations include underweighting U.S. Treasury securities and overweighting U.S. and Japanese equities. Additionally, BlackRock has launched a new actively managed defense ETF focused on global security and resilience.