A recent Bank of America survey indicates a significant uptick in optimism among global fund managers. The survey’s broadest sentiment measure climbed to 5.4, a level not seen since February, driven by factors including cash levels, equity allocation, and global growth expectations. For the third consecutive month, average cash levels remained steady at 3.9 per cent, while institutional equity optimism reached a seven-month high, with a net 28 per cent overweight position.
Notably, 67 per cent of surveyed managers anticipate a ‘soft landing’ for the global economy. Global growth expectations experienced a substantial 25 percentage point increase, with a net 16 per cent now expecting economic weakening, a considerable shift from the net negative 41 per cent recorded in August. This marks the most significant monthly increase since October of the previous year.
Despite a net 58 per cent of managers considering stocks overvalued, a net 28 per cent maintain an overweight position in equities, reflecting the highest level of equity optimism in seven months. The survey also revealed that almost half, specifically 47 per cent, of the fund managers foresee the Federal Reserve implementing four or more rate cuts within the next 12 months.
While risk appetite, as measured by US stocks, continues to outstrip global growth expectations, the survey indicates that the gap between the two is beginning to narrow. This overall increase in optimism suggests a shifting sentiment among fund managers regarding the near-term outlook for the global economy and financial markets.
