Fund managers shift to cash amid concerns of weaker economic growth - BofA's survey
Global fund managers are turning bearish again and increasing allocations to cash in preparation for weaker economic growth over the next 12 months, according to a survey conducted by Bank of America.
The survey, conducted from Oct. 6 to Oct. 12 and canvassing 259 participants with $664 billion in assets under management (AUM), revealed that the broadest measure of sentiment in the survey, based on cash positions, equity allocation, and economic growth expectations, fell from 2.2 to 1.7.
Cash levels as a percentage of assets under management rose to 5.3%, triggering a «buy» signal according to the BofA Global FMS Cash Rule.
Historically, this signal has resulted in S&P 500 returns of 2% in the two months after, 4% in the three months after, and 7% in the six months after.
Around 50% of investors expect a weaker global economy over the next 12 months, with about 30% foreseeing a hard landing, compared to 21% in September. However, 59% still see a soft landing as the base case.
Approximately 44% of respondents anticipate a global recession in the first or second quarter of 2024, up from 36% in September.
Global profit expectations have improved, representing the least pessimistic outlook for earnings since February 2022.
Investors are more optimistic about China's economy, with a net 14% expecting a stronger economy in the country over the next 12 months, compared to zero in September.
The consensus among respondents is for lower short-term interest rates and lower inflation, with expectations for both hovering near the highest levels since the global financial crisis.
About 56% expect bond yields to be lower, marking the highest share of respondents with such expectations on record, going back to 2003.
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