Source: Wall Street News
Fund managers' bullish sentiment has risen to a new high after the peak of the previous round of market conditions, and this is also the first time in more than two years that they are bullish on macroeconomics. According to the survey, the average cash level of fund managers fell from 4.4% of the asset management scale to 4.2%, which is close to a reverse selling signal of less than 4%.
According to the Bank of America's monthly fund manager survey released on Wednesday, the broadest sentiment measurement index based on cash levels, stock allocations, and economic expectations jumped from 4.6 last month to 5.8. Bullish sentiment was at a new high since January 2022, which was also the peak of the previous round of market conditions.
According to a report by Bank of America strategist Michael Hartnett and others, investors are optimistic about the macroeconomy for the first time since December 2021. The number of fund managers who expect the economy to strengthen in the next 12 months is 11% higher than the number of fund managers expected to weaken, far better than the March situation. At the time, there were 12% more people who thought the economy would weaken than those who were bullish. Notably, although global growth expectations are rapidly rising to the highest level since September 2021, they have yet to keep up with soaring stock prices.
Meanwhile, 78% say a global recession is unlikely.
36% of fund managers think the economy “won't land,” compared to only 7% in January; 54% expect a “soft landing” for the economy, down from last month, and only 7% think it's a hard landing (30% in October).
When asked about interest rate expectations, 76% expected the Federal Reserve to cut interest rates twice or more in 2024, while 8% said they would not cut interest rates.
However, fund managers are less optimistic about inflation and bonds. Currently, only 38% expect long-term bond yields to decline, compared to a record 62% in December 2023.
At the same time, 24% of fund managers have expectations of “economic prosperity” (that is, growth above the trend, inflation above the trend), compared to only 12% last month and 5% in January; while “stagflation” expectations (below-trend growth, higher-than-trend inflation) are still a consensus view, the headcount ratio has dropped to 60%, compared to 92% in September last year. At the same time, only 9% expected “stagnation” (below-trend growth, below-trend inflation), and only 6% expected a “perfect scenario” (growth above trend, below-trend inflation).
Optimism at the macro level has also turned to the corporate level. Fund managers' expectations for global profits are now the highest since August 2021, and 20% of fund managers expect global profits to improve, which is the highest level in nearly 3 years. Hartnett pointed out that profit expectations have now caught up with the leading indicator of the global PMI cycle, the ISM manufacturing new order/inventory ratio.
However, according to this expectation, after the economy is hot and profits are surging, it means that inflation is also inevitable. Therefore, it is expected that global inflation will increase the fund manager ratio to the highest level in April 2022, and the ratio of fund managers who believe that short-term interest rates will rise will also reach the highest level since November 2023.
However, according to the survey, 45% of fund managers are still hopeful that inflation will not increase significantly, while 76% of fund managers still expect lower short-term interest rates.
Despite this, for the third month in a row, increased inflation became the biggest tail risk for the third month in a row.
When asked what could trigger the next round of collapse, 33% thought the unemployment rate had reached 4.5%, 30% said the 10-year US Treasury yield had surpassed 4.5%, and 29% said that oil prices exceeded $100 per barrel.
Driven by optimism, fund managers' stock allocations have reached their highest point since January '22.
Hartnett said that the average cash level of fund managers fell from 4.4% of the asset management scale to 4.2%, which is close to a reverse sell signal of less than 4%.
Furthermore, according to the survey, 26% of net fund managers believe that gold is overvalued, the highest percentage since August 2020.
edit/lambor