According to Bank of America’s global fund manager survey (FMS), investor sentiment regarding financial markets is no longer extremely bearish, as reflected by a 17-month high in global equity allocation.
However, it has not yet turned bullish, with the FMS cash level increasing to 4.9%. There has been a more dramatic shift in relative exposure, including a record increase in exposure to U.S. equities and a record decrease in exposure to emerging market (EM) equities.
This shift comes as optimism about China's growth has declined, returning to levels seen during lockdowns. The BofA Bull & Bear Indicator has risen to 4.1, reflecting these changing dynamics in investor sentiment.
Here are the key takeaways from the September GFS:
- 74% of surveyed investors believe in a "soft or no landing," 21% say hard landing;
- 27% expect no recession at all;
- 75% anticipate a decline in short rates;
- There is a consensus to "avoid China" due to the lack of expectations for stronger Chinese growth;
- Japan is receiving high favor with the biggest overweight position since December 2018;
- 77% say long quality;
- Sticky inflation/hawkish central banks still seen as the biggest "tail risk" (40%); and
- 55% consider U.S. tech as the most crowded trade.