Global investors bullish on stock markets

Company News

by Glenn Dyer

According to the June survey of big global investment managers by Bank of America, it's a bull market, and it's going to run and run.

The survey shows that major global investors are likely to keep pumping money into record-hitting stock markets.

Bank of America said that the bullish view stood out in the latest survey (these big global investors have been bullish all year).

Cash holdings for these big global investors remain at three-year lows—around 4%, down from 4.2% in April—as they pour billions into shares, much of it into the U.S. and into giants led by Nvidia.

So, it's no wonder that B0A said that, in answering a question in the survey about the asset class that would benefit most from a reallocation of cash, 32% of respondents opted for U.S. shares. Another 19% said the cash would go into global equities, while a quarter of the respondents cautiously indicated they would buy government bonds.

A majority of investors surveyed—53%—believe there will be no global recession in the next 18 months, although that had eased a bit from May.

The survey, conducted from June 7 to 13 and covering 206 participants with $640 billion in assets under management, showed investors remained the most bullish since November 2021, with cash levels in money-market funds at a three-year low. Cash funds currently have about $6.1 trillion in assets, according to data market estimates.

The one play a huge majority of investors still favor is the so-called Magnificent Seven technology giants such as Apple, Microsoft Corp., and Nvidia Corp. That no doubt helped Nvidia climb to the top of the most valuable list on Tuesday for the first time, edging out Microsoft with Apple in third spot.

Some 69% of respondents still favor that trade—which BoA says remains among the most crowded trades in history (which conversely makes it one of the most dangerous plays if something goes wrong).

That trade helps explain why 41% of fund managers in the survey expect large-cap growth stocks to continue to drive the U.S. rally. Big tech has contributed nearly three-quarters of the S&P 500’s rally this year, with Nvidia alone driving more than 34% of the gains in the index, which is up around 15% so far this year, and Nasdaq is up more than 20%.

For the first time ever, three companies are worth more than $3 trillion each—simply because of demand, or rather FOMO (fear of missing out) on the AI boom, especially after many missed the early bus called Nvidia in 2023.

Meanwhile, investors are a little more confident about the outlook for the U.S. economy. In the June survey, 84% of those polled expected the Federal Reserve to lower interest rates in the second half of 2024, with 39% looking for cuts at the September 18 meeting.

In May, 82% looked for the first rate cut to be in the second half of this year. A net 78% of investors predict that the Fed will cut rates two, three, or more times in the coming 12 months.

On the growth front, 6% of portfolio managers are looking for weaker economic growth in the coming year. This compares to a net 9% in May and April, where a net 11% of managers were looking for stronger world growth.

Inflation projections further settled in June, with a net 57% looking for lower CPI in the next 12 months, up from a net 56% in May and a net 45% in April.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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