Rising numbers expect recession to be avoided
A rising number of fund managers believe markets will dodge a recession until 2025, according to the latest Bank of America fund manager survey.
The monthly global fund manager survey from Bank of America surveyed 262 panellists with $652 billion in assets under management between 6 and 13 July.
A quarter expect there will be a recession by the end of 2023 and 23 per cent expect one by the end of the first quarter of 2024, but both of these numbers are lower than in June.
Instead, the number of managers who believe there will not be a global recession in the next 18 months has risen from 14 per cent in June to 19 per cent this month.
The risk of a bank credit crunch or global recession has also fallen to 18 per cent, down from just over 20 per cent in June. The biggest tail risk remains high inflation keeping central banks hawkish which had risen during the month to 45 per cent.
Fund managers expect global growth to weaken in the next 12 months but BoA said this is “marginally improved” on June’s figure.
Cash weightings rose slightly from 5.1 per cent to 5.3 per cent.
Looking at allocations, managers are bullish on cash, emerging markets, healthcare, alternatives and consumer staples. They are bearish on equities, UK assets, utilities and real estate. During the month, they rotated into US, insurance and EM equities at the expense of healthcare, Japan assets and bonds.
As a result of these moves, fund manager sentiment, which is based on respondents’ cash position, equity allocations and economic growth, expectations is still “stubbornly low”.
Almost half (42 per cent) of fund managers believe the widespread adoption of artificial intelligence (AI) will mean higher profits in the next two years. Just 1 per cent believe it will lead to more jobs.
Some 11 per cent said the risk of an AI bubble was their biggest tail risk affecting markets.
Earlier this week, Magellan discussed how it is betting on Generative AI in its flagship $7 billion Magellan Global Fund with holdings including Amazon and Microsoft, which is its top holding in the fund at 6 per cent.
Managers Nikki Thomas and Arvid Streimann, said: “The innovation in artificial intelligence is providing many new opportunities for companies, as well as disruption risks that always result from major progressive evolutions.”
AUTHOR
Laura Dew
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Fund managers are entering 2025 with the most bullish sentiment since August 2021 and record high allocations to US equities, thanks to the incoming Trump administration.
