Investor sentiment remains bearish but is no longer at ‘apocalyptic’ levels, according to a global survey of fund managers.
Bank of America’s (BofA) monthly research, which in August polled the views of 250 investors with a collective $752 bn in assets, finds that expectations for inflation and rate shocks have lessened, although they are still major concerns.
Cash levels stand at 5.7 percent on average, a high figure but down on the 6.1 percent recorded in July’s survey.
The survey results come amid a sustained equity rally, which has seen the MSCI All Country World Index rise 13 percent since mid-June. Investors, however, are concerned that stocks could be in a bear market rally and the lows may not be in for the year.
The proportion of investors expecting lower global consumer prices in the next 12 months rose to 88 percent in August, the highest level since December 2008, reports BofA.
Meanwhile, investors are reigning in their forecasts on how much further US interest rates can rise, with further hikes of between 100-125 basis points the most common prediction. The Federal Reserve’s target funds rate currently stands at 2.25 percent-2.5 percent, following four consecutive increases.
Underlining the improving mood, investors report their net underweight position in equities at -26 percent this month, compared to -44 percent in July. They also added to tech and consumer discretionary stocks, while cutting back on staples and utilities.
‘The net percent of investors that think ‘growth’ will outperform ‘value’ over the next 12 months turned positive for the first time since August 2020,’ add the report authors.
Respondents view the biggest tail risk to markets as inflation staying higher (selected by 39 percent), followed by a global recession (24 percent), hawkish central banks (16 percent) and systemic credit events (8 percent).