Global sentiment improves on soft landing hopes, BofA survey of fund managers shows By Investing.com

Investing.com — Global investor sentiment improved for the first time since June on expectations of a soft economic landing as the Federal Reserve cuts rates, Bank of America revealed in its latest Global Fund Manager Survey (FMS ).

The data shows a slight drop in the cash allocation from 4.3% to 4.2%, with BofA describing investors as “nervous bulls”.

The survey highlighted a significant shift in portfolios, including a notable shift to bond-sensitive sectors such as utilities, which are at their highest level of overweight since 2008. In contrast, cyclicals and commodities saw allocations fall to a lowest in the last seven years.

BofA said 6 in 10 fund managers surveyed believe current monetary policy is “too restrictive” and that up to 90% see a steeper yield curve.

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

Moreover, FMS’s risk appetite is currently at an 11-month low, the survey found. The busiest trade is still “long Magnificent 7”, according to 46% of respondents, but interest in “shorting Chinese stocks” and “long gold” is increasing.

Despite worries about slowing growth in China, which has hit a three-year low for optimism, two-thirds of respondents think a recession is unlikely. Investors continue to favor high-quality stocks, with 70% predicting they will outperform lower-quality stocks.

The biggest risks identified by investors include a US recession, with 40% citing it as their main concern, followed by inflation, which rose to 18% as a significant threat, up from 12% in August.

However, equity allocations remained unchanged, with utilities and banks posting the largest overweight positions.

On the other hand, commodity allocation fell to the lowest level since June 2017, the report said.

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