The final Bank of America (BoA) Global Fund Manager Survey of the year has found respondents are optimistic going into 2024, with sentiment the most upbeat it has been for two years.
December’s survey questioned 254 panellists with US$691 billion in assets under management.
It found investors are holding their lowest allocation to cash since April 2021 at a net 3 per cent overweight and are increasing their equity weightings to the highest overweight since February 2022, having increased them by 13 percentage points during the month to sit at a net 15 per cent overweight.
This is the first time in 2023 that investors have been overweight equities for two consecutive months, BoA said.
From a geographic perspective, they favoured European equities – which jumped 14 percentage points – emerging markets and UK equities. To fund this, they rotated out of equities in Japan and the US. Japanese equity allocations, in particular, experienced their greatest monthly decline since March 2020 as they declined by 11 percentage points during the month.
Sector wise, respondents opted for banks, industrials and materials at the expense of energy, staples and pharmaceuticals. BoA said the 16 percentage point spike in bank allocations is a “volatile” move as the largest monthly increase since January 2022 preceded the largest monthly decline in bank allocations in November.
The cash weighting of 4.5 per cent is a “collapse” from as high as 5.3 per cent just two months ago.
Allocations to bonds sit at a bullish net 20 per cent overweight and 45 per cent of respondents said they expect bonds to perform best in 2024. This represents the highest allocation to bonds since March 2009.
Some 66 per cent are forecasting a “soft landing” in the next 12 months and a third are expecting to see no recession at all.
Overall fund manager sentiment, which is based on cash positioning, equity allocations and economic growth, is the least bearish it has been since January 2022.
The biggest tail risk is a global recession followed by high inflation keeping central banks hawkish and worsening geopolitics, and half are expecting to see a weaker economy, but this is down from 57 per cent in the previous month.
