The sentiment among global asset managers was the most bullish in nearly two-and-a-half years based on cash levels, equity allocation and economic growth expectations.
Average cash levels of investors fell to 4 per cent of AUM, the lowest since June 2021, BofA Global Research’s Global Fund Manager Survey (FMS) for May, that polled 245 panellists with $642-billion AUM, said.
FMS investors are the most overweight stocks since January 2022, with allocation increasing 7 percentage points month-on-month to net 41 per cent overweight, with a bias towards large-caps.
India was the third most-liked Asia-Pacific market after Japan and Taiwan, with 18 per cent of the panellists overweight India. Investors had turned neutral on China after being underweight for months. China equities are 28 per cent off the January lows, as policymakers seek to address investor concerns. Net 41 per cent of the panellists expect the China economy to strengthen over the next 12 months versus -10 per cent in February.
Higher inflation remained the chief ‘tail risk,’ according to 41 per cent of FMS investors. Concerns over geopolitics remained the second-biggest risk followed by a hard landing of the global economy.
Fed rate-cuts
About 82 per cent expect the Fed to cut rates in the second half of the year, and 78 per cent expect the Fed to cut rates two, three or more times in the next 12 months. About 47 per cent expect lower bond yields, going forward.
Global growth expectations fell for the first time since November last year. However, 78 per cent of FMS investors say a recession is “unlikely” within the next 12 months, in line with last month’s expectations. “Soft landing” remains the conventional wisdom, with 56 per cent expecting that outcome.
For the US economy, 64 per cent of FMS investors do not expect a recession in the next 12 months. For those expecting a US recession, 19 per cent expect it to occur in the first half of 2025, while 14 per cent expect a recession some time in 2024.