Bearish recession fears pushed out for fund managers
Fund managers are now the least bearish since February 2022 with cash weightings falling below 5 per cent, according to Bank of America.
Its latest Global Fund Manager Survey questioned 247 respondents with US$635 billion in assets under management between 4–10 August.
Cash weightings fell from 5.3 per cent in July to 4.8 per cent in August, its lowest weighting since November 2021.
They had fallen in June from 5.6 per cent to 5.1 per cent, which prompted BoA to describe how it was ‘no longer uber-high’ but rose back up in July to 5.3 per cent.
In August, the organisation said respondents are pivoting from cash to equities. On a relative basis, investors are now the least underweight to equities relative to cash since February 2022.
Equity allocations increased by 13 percentage points month-on-month with preferences for emerging markets, Japan and the UK, while allocations to US and Eurozone equities saw a decline.
In the case of US equities, the 12-percentage-point month-on-month decline almost fully reversed gains seen in July.
Overall fund manager sentiment, which is based on cash position, equity allocations and economic growth, is “improving” and the least bearish since February 2022.
The number of respondents who said there will be no recession in the next 18 months has risen from 19 per cent in July to 31 per cent, and 42 per cent don’t expect to see one in the next 12 months.
The volume of those who expect to see a recession in the fourth quarter of 2023 has dramatically reduced from around a quarter to 13 per cent, with expectations instead pushed out to the first quarter of 2024.
Investors still expect global growth to be weak over the next 12 months, but the figure has “improved significantly” from 60 per cent in July to 45 per cent this month.
The majority (81 per cent) expect inflation to slow in the next 12 months, prompting speculation that the Federal Reserve will cut rates next year.
The biggest tail risk is high inflation keeping central banks hawkish at 45 per cent, unchanged from July, followed by worsening geopolitics at 14 per cent and a bank credit crunch and global recession at 14 per cent.
AUTHOR
Laura Dew
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