EU poised to impose €21 billion tariffs on U.S. if no trade deal, Tajani says
Investing.com -- A majority of investors expect international equities to deliver the strongest returns over the next five years, according to Bank of America’s (BofA) latest Global Fund Manager Survey (FMS).
The survey reveals that 54% of respondents picked international stocks as the best-performing asset class, followed by 23% who favored U.S. equities, 13% who chose gold, and just 5% who opted for bonds.
The June survey, which included 190 participants overseeing $523 billion in assets, also points to improving sentiment on global growth and recession risks. Expectations of a global recession have reversed sharply in recent months.
In April, a net 42% of fund managers saw a recession as likely, but by June, that changed to a net 36% now saying it is “unlikely.” Moreover, conviction in a “soft landing” for the global economy rose to 66%, marking the highest reading in eight months.
Despite the improved macro outlook, investors remain cautious on U.S. assets. The FMS found that fund managers are now at their most underweight position in the U.S. dollar in 20 years.
“[The] biggest summer pain trade is long the buck,” BofA strategists led by Michael Hartnett said in the report.
On equities, U.S. stocks remain heavily underweight relative to historical allocations, while exposure to the eurozone and emerging markets has increased.
Regarding fiscal policy, participants voiced skepticism about the impact of proposed U.S. tax cuts under the “Big Beautiful Bill.”
While 33% believe it will boost growth in the second half of 2025, 59% expect no positive effect on economic activity. At the same time, 81% anticipate that the bill would widen the U.S. budget deficit.
In terms of portfolio positioning, fund managers have rotated into equities, emerging markets, energy, and banks, while reducing exposure to defensives such as utilities, staples, and healthcare.
The most crowded trade remains “long gold” for the third consecutive month, cited by 41% of respondents, while “long Magnificent 7” has slipped to 23%.
Tail risks continue to center on geopolitical tensions and trade. The risk of a trade war triggering a global recession remains the top concern, cited by 47% of respondents, though this is down from 80% in April.
BofA also highlighted the most contrarian trades based on fund manager sentiment. According to the survey, the three most contrarian positions are: long U.S. dollar and short gold; long U.S. stocks and short European equities; and long consumer stocks and short banks.