Introduction

According to a widely followed survey from Bank of America, professional investors are becoming increasingly pessimistic in light of the current macroeconomic conditions. The bank’s Global Fund Manager survey revealed that investors are raising their cash levels and maintaining a negative outlook on growth and the economy.

Key Findings

The survey showed that the cash allocation among respondents increased from 4.9% to 5.3%, while they remained neutral on stocks. This shift comes at a time of heightened uncertainty on Wall Street, with rising yields, increasing oil prices, persistent inflation, and ongoing conflicts in the Middle East. Investors are also closely monitoring the Federal Reserve’s stance on interest rates, as the central bank hinted at a possible rate hike before the end of the year.

Outlook on Global Economy

Half of the surveyed investors expect a weaker global economy in the next 12 months, only slightly down from 53% in September. Furthermore, more investors are betting on a hard-landing scenario and anticipating a recession. While 59% still believe in a soft landing, nearly a third of respondents now anticipate a hard landing, compared to 21% in September. Some investors even expect a recession in the first half of 2024.

Views on Monetary and Fiscal Policies

A record number of respondents believe that monetary policy is too tight, while fiscal policy is too easy. The percentage of those viewing monetary policy as too restrictive reached its highest level since November 2008, with 24% expressing this view. Despite recent increases in bond yields, 56% of respondents expect yields to be lower in the next 12 months, a historic high since 2003. Respondents identified high inflation and its impact on the Fed’s hawkish stance as the biggest market risk, although 80% anticipate lower inflation in the coming year.

Contrarian Signal

Although the survey indicates elevated cash levels, it’s worth noting that cash holdings above 5% are often seen as a contrarian buy signal, suggesting that investors have become overly pessimistic.

Methodology

The survey was conducted between October 6 and October 10 and included 295 panelists managing a total of $736 billion in assets.

Source: ‘s Michael Bloom contributed reporting.