Global investor worries about inflation and central banks are 'rapidly diminishing'

investmentweek.co.uk:

The conviction that the Federal Reserve has reached the peak of its hiking cycle is now the strongest since investors began providing their view on the timing.

Nearly half of respondents believed that high inflation keeping central banks hawkish was the main tail risk for markets in July. In November, however, this number fell to just 25% as geopolitical risk jumped to the top spot.  

The conviction that the Federal Reserve has reached the peak of its hiking cycle is now the strongest since investors began providing their view on the matter. According to the survey, over 76% of respondents believe the rate hike cycle is over, up from 60% the previous month.

Global investors remain set on Goldilocks soft landing despite bearish stance

Consensus is for lower short-term rates and lower inflation, the Bank of America found, with expectations for both hovering near Global Financial Crisis highs. Only 6% expect global inflation to inch higher in 2024, and just 6% expect higher short-term rates.

‘Soft' and ‘no' landing expectations were back to their summer high in November, rising to 74% from 64% last month, while ‘hard landing' fears eased to 21% of respondents from 30% in October. 

According to BofA, two out of three investors surveyed see a ‘soft' landing as their base case scenario for the global economy next year. 

Last month, the yield on the 30-year US Treasuries went as high as 5.175% on concerns that central banks would keep rates higher for longer. However, a record 61% of investors now predict lower bond yields in twelve months' time. 

Following the market rout in October and despite the ‘year of the bond' failing to deliver in 2023, more than half of fund managers expect bonds to be the best performing asset