Money managers are increasing their allocations to higher-risk assets and reducing their cash holdings amid higher growth and inflation expectations, Bank of America Merrill Lynch’s latest monthly fund manager survey found.
A net 43% of respondents reported being overweight equities in November, the highest reading in six months and up 17 percentage points from October. Also, a net 11% reported being overweight real estate, after taking a neutral stance last month.
Accordingly, a net 16% of managers reported being overweight cash, the lowest reading in 10 months and down from a net 31% last month.
A net 81% of managers now expect the Federal Reserve to raise rates in the fourth quarter, vs. a net 47% last month, according to BofA Merrill Lynch.
Managers also showed improved confidence in the Chinese and global economy in November. Only a net 4% of global respondents expect the Chinese economy to weaken in the next 12 months, an improvement over last month’s 22%. A net 35% believe the global economy will strengthen over the next 12 months, up 22 percentage points from October.
And while the possibility of a Chinese recession continues to be viewed as the biggest tail risk, that reading dropped to a net 38% from 39% last month and 54% in September.
The survey of 201 money managers representing $576 billion in assets under management was conducted Nov. 6-12.