Global sentiment improves on soft landing hopes, BofA fund manager survey shows

Investing.com -- Global investor sentiment has improved for the first time since June, driven by expectations of a soft economic landing as the Federal Reserve is anticipated to cut rates, Bank of America revealed in the latest Global Fund Manager Survey (FMS).

The data shows a slight dip in cash allocation from 4.3% to 4.2%, with BofA describing investors as "nervous bulls."

The survey highlighted a marked shift in portfolios, including a noticeable rotation toward bond-sensitive sectors like utilities, which are at their highest overweight levels since 2008. In contrast, cyclicals and commodities have seen allocations plummet to a seven-year low.

BofA said 6 out of 10 surveyed fund managers believe that current monetary policy is “too restrictive,” and as much as 90% see a steeper yield curve.

Meanwhile, 79% forecast a soft landing for the global economy, although global growth expectations remain pessimistic, with 42% still predicting a weaker economy, albeit down from 47% in August.

Moreover, FMS’ risk appetite is currently sitting at an 11-month low, the survey reveals. The most crowded trade is still "long Magnificent 7," according to 46% of respondents, but interest in "shorting China stocks" and "long gold" is on the rise.

Despite concerns over China’s slowing growth, which hit a three-year low in optimism, two-thirds of respondents believe a recession is unlikely. Investors continue to favor high-quality stocks, with 70% predicting that these will outperform lower-quality equities.

The biggest risks identified by investors include a U.S. recession, with 40% viewing it as the top concern, followed by inflation, which rose to 18% as a significant threat, up from 12% in August.

Still, equity allocations remained unchanged, with utilities and banks seeing the largest overweight positions.

On the other hand, commodity allocation slumped to the lowest level since June 2017, the report shows.

In terms of style, investors expect value to outperform growth at a 10-month high, according to the survey.

Source: Investing.com