The Zhixin Finance app learned that a global survey by Bank of America showed that the optimistic sentiment surrounding the highly anticipated Fed rate cut has boosted investor confidence for the first time since June. Bank of America analyst Michael Hartnett stated in a report that the bank's confidence indicators based on cash levels, stock allocations, and growth expectations rose from 3.6 to 3.9. In addition, fund managers believe that there is a 79% chance of the U.S. economy receiving support from the rate cut.But after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.However, Michael Hartnett added that despite this, investors are still 'nervous bulls', with risk appetite at an 11-month low. He reiterated his preference for bonds last week. The survey also showed that investors are heavily turning towards bond-sensitive sectors such as utilities and moving away from sectors that usually benefit from a strong economy; global economic growth expectations have slightly improved from August, but 42% of respondents still expect a weakening economy.​

The U.S. stock market has rebounded from its August lows, as the market optimistically believes that with the Fed preparing to cut rates, the U.S. economy can avoid recession. The Fed will announce its September interest rate decision early Thursday morning Beijing time. While investors generally expect the Fed to begin a rate cut cycle, there is still a division over whether the cut will be 25 basis points or 50 basis points.

Michael Hartnett stated that the survey shows that stocks related to the economy (or so-called cyclical stocks) may benefit from a larger tactical rate cut. Currently, investors favor sectors considered as bond proxies, with the risk exposure of the utility sector reaching the highest level since 2009. Additionally, the proportion of investors' shareholdings in the consumer staples sector has reached the highest level in a year, and the investment allocation for the banking sector has reached the highest level since February 2023. Meanwhile, the proportion of investor shareholding in technology stocks is at the lowest level since April 2023, while the proportion of shareholding in energy stocks is at the highest level since December 2020.

The Bank of America survey was conducted from September 6 to September 12, with a total of 206 participants and total assets of $593 billion. The survey also showed that about 52% of respondents believe that the US economy will not enter a recession in the next 18 months; about 90% of respondents expect the US bond yield curve to steepen, which is the highest level on record. In addition, respondents identified the biggest tail risks as: US economic recession (40%), geopolitical conflict (19%), accelerating inflation (18%), systemic credit timing (8%), US elections (6%), and AI bubble (5%).

Editor/Somer