Fund managers are less optimistic about the strength of the global economic recovery, but they are still very optimistic about their portfolio positioning.
The latest results from the influential Bank of America (BoA) monthly survey of global fund managers in 1994 showed “fueling macro optimism” as global growth expectations continue to “decline significantly”.
The number of professional investors expecting economic growth plunged to just 13% in September, the lowest level since April 2020 and less than the high of 91% in March this year. According to the survey, the decline in growth expectations is attributed to the continued spread of the Covid-19 delta variant.
Despite the pessimism about the recovery, this is not reflected in the Fund manager assignmentsthat remain largely bullish. The global equity allocation peaked at 62% in April but is now at 50%. The survey shows 9% of managers are taking a higher risk, up from 6% in the previous month, but still below the 25% high in February.
However, investors do not feel the need to hedge against a sharp decline in stocks and are less hedged, with -45% net of investors hedge against a market decline over the next three months and only 6% expecting a recession.
Michael Hartnett, BoA’s chief investment strategist, said, “Growth expectations say equity allocation should go down, but risk appetite tells the story that investors are ignoring the macro.”
As fund manager continues stick to their stock allocation, cash has fallen marginally from 4.3% to 4.2% m / m and portfolios remain overweight cyclicals like banks, commodities and industrials while underweight bonds.
However, they have become somewhat more defensive with an increase in consumer staples and healthcare stocks in portfolios.
While investors can bring many risks with them, they don’t think inflation is one of them. 69% follow the stance of central banks who believe that an increase in the cost of goods will be temporary.
U.S. inflation jumped to a 13-year high this summer and stayed above 5% as pent-up demand flowed through the pandemic and economic controls. In the UK, inflation rose to 2.5% at the beginning of the year but fell back to 2% in August.
Even though Inflation can be fleeting, 84% of managers expect the US Federal Reserve to end its bond-buying program by the end of the year. Almost half believe the delta spread will be the most likely reason preventing the Fed from tightening over the next six months.
Recovery optimism is fueling, but fund positioning remains optimistic