Bullish asset allocators retreat from bonds

Bank of America fund managers bonds fixed income

19 June 2024
| By Laura Dew |
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The latest Bank of America Global Fund Manager Survey has found investors are the most bullish they have been since November 2021, pivoting away from bonds and into equities.

Its monthly Global Fund Manager Survey questioned 238 panellists with US$721 billion in assets under management between 7 and 13 June.

“Global fund manager sentiment is the most bullish since November 2021 driven by low 4 per cent cash levels and big equity allocations, but global risk sentiment is not yet extreme,” the organisation said.

The Bank of America’s overall fund manager sentiment, which is based on cash levels, equity allocations and economic growth expectations, rose from 5.9 to 6.  

Unlike last month, when investors were making modest increases to their bond allocations, bonds fell by 11 percentage points month-on-month to a net 17 per cent underweight. This is the biggest underweight since November 2022.

Instead, they are bullish on equities, especially those in Europe, healthcare and technology. A net 39 per cent of respondents said they are overweight on equities. Allocations to European and UK equities rose, while emerging markets and Japanese equity allocations fell. 

Average cash levels remain unchanged at 4 per cent, a three-year low, and allocations fell to a net 6 per cent underweight. 

A rising risk this month is the threat of the upcoming US election which was cited as the biggest tail risk by 16 per cent of respondents, up from 9 per cent last month, to sit in third place behind inflation and geopolitics. The US election between Donald Trump and President Joe Biden is scheduled to take place on 5 November 2024, less than six months away.

Their biggest fear around the election is changes to trade policy, followed by geopolitics and immigration. 

Higher inflation remains the top tail risk, although the volume concerned has reduced from 41 per cent in May to 32 per cent in June. However, expectations for lower inflation increased from 69 per cent to 72 per cent.

The level expecting a weaker global economy dropped from a net 9 per cent to net 6 per cent, and the majority think “below trend growth and above trend inflation” is the most likely scenario. 

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