Fund managers pin hopes on Santa rally

20 October 2023
| By Laura Dew |
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Global fund managers are expectant of a stockmarket rally at the end of the year, according to October’s fund manager survey from Bank of America. 

The monthly report, which questioned 295 panellists with US$736 billion in assets under management between 6 and 12 October, found two out of three are expecting a year-end rally in equities. 

Since the start of the year to 19 October, the ASX 200 has gained 0.35 per cent and the UK's FTSE 100 has gained 0.45 per cent. In the US, the Dow Jones has gained 1.6 per cent.  

In expectation of this, managers have shifted a higher proportion of their assets into cash from 4.9 per cent in September to 5.3 per cent in October. Any amount higher than 5 per cent is viewed as a ‘buy’ signal by Bank of America and seen as fund managers taking a bullish position on the asset. 

Cash weightings reached as high as 5.6 per cent in June, but had fallen to 4.8 per cent in August. 

Overall fund manager sentiment, which is based on cash positions, equity allocations and economic growth expectations, fell from 2.2 to 1.7 points.

Looking at the specific equity regions that are in favour, respondents have been rotating out of Eurozone equities and emerging markets into US and Japanese equities. US equities had previously seen a “record monthly jump” in September when allocations rose by 29 percentage points, the first time they had been overweight since August 2022. 

The weighting to Eurozone equities fell nine percentage points to a net 19 per cent underweight, compared to a 10 per cent net underweight in September. 

The net overweight to Japanese equities rose from 10 per cent to 16 per cent in October, the highest since 2018.

Energy, commodities, Japan, banks and technology stocks were in favour while consumer staples, emerging markets, Eurozone equities and utilities were out of favour.

One in four believes there will be no recession in the next 18 months, slightly higher than last month, but the number who are expecting one in the first half of 2024 is also rising, up from 36 per cent to 44 per cent. 

High inflation keeping central banks hawkish is seen as the biggest tail risk this month at 31 per cent followed by worsening geopolitics at 23 per cent and a global recession at 21 per cent. 


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