macro

Title: August 2024 Bank of America Global Fund Manager Survey
1/ In August 2024, investor sentiment took a defensive turn, driven by growing concerns over the global economic outlook. According to the Bank of America Global Fund Manager Survey, which polled 220 participants managing $590 billion in assets, there was a marked shift towards caution, reflected in reduced allocations to equities and increased cash holdings, with sentiment among fund managers falling to a seven-month low.

2/ Only 31% of respondents were overweight in stocks, a significant drop from 51% in July, while cash levels rose to 4.3% of assets under management, up from 4.1% the previous month. This shift was largely attributed to weak U.S. payroll data for July and the volatility shock following the rebound in the Japanese yen.

Macro Strategist at BlockBase Venture: https://blockbase.co/

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3/ The survey revealed a sharp decline in global growth expectations, with a net 47% of respondents now anticipating a weaker global economy over the next 12 months, a significant drop from the net 27% in July.

4/ Despite this pessimistic outlook, a substantial 76% of respondents still expect a "soft landing" for the global economy, which refers to a gradual slowdown rather than a severe recession.

5/ This optimism is closely tied to expectations for lower interest rates, as 93% of respondents believe short-term rates will be lower in a year's time, marking the highest level of consensus on this point in the past 24 years.

6/ Additionally, viewing global monetary policy as the most restrictive since October 2008, 60% of those surveyed (up from 31% in July!) anticipate that the U.S. Federal Reserve will implement four or more rate cuts over the next 12 months.

7/ In terms of asset allocation, there has been a noticeable shift toward more defensive positions. Allocation to equities has fallen significantly, with a net 11% of portfolio managers now overweight, down from 33% in July. Conversely, exposure to bonds has increased, with a net 8% of managers now overweight, the highest level since December 2023, marking a significant reversal from a net 9% underweight in the previous month.

8/ The survey also revealed shifts in regional equity allocations. The largest reduction was seen in Japanese equities, which fell to a net 9% underweight from a 7% overweight in July, marking the largest one-month drop since April 2016. US equities also saw a decline, with allocation dropping to a net 11% overweight from 16% in July. In contrast, the Eurozone and global emerging markets saw smaller declines in overweight positions.
The survey identified the biggest tail risks as a potential U.S. recession, cited by 39% of respondents, overtaking geopolitical conflict, which was the top concern in the previous month. Other significant risks included higher inflation, systemic credit events, and a potential bubble in artificial intelligence stocks.

9/ Despite these concerns, the "Magnificent Seven" tech stocks, which include major U.S. technology companies, remained the most crowded trade, although investor conviction in this trade has diminished to 53% from 71% a month ago.