Fund managers most optimistic in over four years: BofA Fund Manager Survey

Bank of America’s Global Fund Manager Survey (FMS) for October reveals renewed optimism among fund managers.

Its broadest measure of FMS sentiment, based on cash levels, equity allocation, and economic growth expectations, rose from 3.8 to 5.6, its largest monthly rise since June 2020.

FMS investors lowered cash levels to from 4.2per cent to 3.9per cent, lowest level since February 2021. FMS investors raised their equity allocation by the largest amount since June 2020. Net 31per cent of FMS investors are overweight equities, up from net 11per cent overweight last month.

Japan was the favourite market in APAC, with Taiwan a distant second. The upliftment in sentiment on China has come at the expense of India as seen from the dissipation of the gap in allocations. India was the second favourite market in the region last month with net 25 per cent investors overweight. India has now slipped to fifth position with a neutral stance. Net 18 per cent had expected a weaker Chinese economy and short China was the most crowded trade last month.

China’s stimulus announcement caused investors to raise their outlook on Chinese growth to net 48per cent expecting a stronger economy, the most optimistic level since April 2023. 17per cent of investors say “long gold” and 14per cent say “long China equities” are the most crowded trades.

Seventy six per cent of FMS investors believe there will be a soft landing for the US economy, while 14 per cent believe there will be no recession. Thirty three per cent of FMS investors see geopolitical conflict as the biggest ‘tail risk’, up from 19per cent a month ago. Concerns over accelerating inflation continued to rise from 18per cent to 26per cent, and concerns about US recession faded to 19per cent.

Investors say election most likely to impact trade policy (47per cent), geopolitics (15per cent) & taxation (11per cent). One-third of the investors said they are set to increase hedging pre-election.