Each month, the Bank of America (BoA) publishes its Global Fund Manager Survey — a report that canvasses the views of institutional, mutual and hedge fund managers around the world. The September Global Fund Manager Survey had 206 participants who manage $593 billion in assets. This week, we take a look at some of these insights and highlight a couple of charts that we think are most significant.
In short, sentiment among global fund managers improved in September, with the first upturn since June carried by anticipation of lower borrowing costs in the US and a soft economic landing once the US Federal Reserve (Fed) cuts rates.
But investors are “nervous bulls,” highlighted by moves into bond-sensitive sectors such as utilities and real estate investment trusts (REITs). The survey was released on 17 September, a day before the Fed was expected to cut interest rates for the first time since the pandemic-era.
Source: BoA Global Fund Manager Survey
Money managers made a big rotation to utilities and other bond-sensitive sectors from cyclicals. Utilities were at their highest overweight since 2008 while commodity allocation hit its lowest since mid-2017. The “bigger the Fed cut, the better for cyclicals,” the survey indicated.
Six out of 10 survey respondents said monetary policy was “too restrictive,” a 16-year high for that view. 79% of global investors foresee a “soft landing” for the economy, with 11% projecting a “hard landing” while 7% see no landing. Also, two-thirds of investors consider a recession “unlikely” despite a three-year low in optimism about growth in China.
Here are some other key findings:
- A record 90% see a steeper yield curve.
- Cash levels slipped to 4.2% from 4.3% in August.
- Risk appetite is at an 11-month low.
- “Long Magnificent 7” is the most crowded trade for the 18th consecutive month, but it’s the least crowded since November 2023.
- 7/10 investors say high-quality stocks will outperform low-quality stocks.
- “Short China stocks” and “long gold” trades are on the rise.
China is seen as having all the symptoms of a “balance-sheet recession” i.e., a protracted period of deflation, property market declines, and a debt overhang. And, just as in Japan, this has followed an amazing period of growth. China faces a unique set of challenges, which in some instances make it worse off than Japan — population decline, housing troubles, an even more pronounced slump.
Source: Bloomberg
