Investors doubtful over V-shaped recovery



The proportion of investors who expect we will see a V-shaped recovery has declined to 14% in favour of a W-shaped one.
According to the monthly Bank of America global fund manager survey, which questioned 210 participants with US$607 billion ($865.96) in assets under management, only 14% expected to see a V-shaped recovery, down from 18% in June.
Expectations of a V-shaped recovery were at a low of 10% in May but had risen to 18% in June as countries eased restrictions. However, it had since fallen back again.
Some 44% said they expected a U-shaped recovery and 30% expected a W-shaped recovery, up from 21% in June.
BoA said the downturn indicated investors’ conviction in strength and duration of the recovery was low.
Earlier this week, former Federal Reserve head Janet Yellen said she expected the recovery would be a ‘Nike swoosh’. This was because, she said, she did not expect the V-shaped recovery to continue as US output was expected to decline between 5%-8% in the next year.
In light of this lower conviction, investors’ cash weightings increased from 4.7% in June to 4.9% as investors were nervous about the “virus, macro and election”. The 10-year cash average was 4.7%.
Cash held in retail funds declined from 5.2% to 4.8% but BoA said this was still an “elevated level” for funds to deploy.
The largest tail risk was a second wave of COVID-19 at 52% followed by concerns about the US election in November 2020. This had been the largest tail wave for the past four months, overtaking concerns about the US/China trade war which had dominated for almost two years.
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