Fund managers’ optimism ticked up slightly in September thanks to the expected rate cut by the Federal Reserve, but global growth expectations remain low, according to the results of Bank of America's latest Global Fund Manager Survey.
In the survey of 243 fund managers, who oversee a total of $593 billion in assets, the broadest measurement of sentiment — which is based on cash levels, economic growth expectations and equity allocations — rose to 3.9 from 3.6 in August. The broad measure of sentiment had bottomed out at 0.3 in October 2022.
Reflecting the improvement in sentiment, fund managers dropped their cash level allocations to 4.2% in September from 4.3% in August.
Respondents remained pessimistic regarding global growth expectations, however, with a net 42% expecting a weaker economy over the next 12 months, although it is an improvement over the net 47% expecting a weaker economy in the August survey, which represented an eight-month low in optimism.
Remaining steady for fund managers were equity allocations at a net 11% overweight, the same as in August after dropping from a net 33% overweight in July. It is the lowest equity allocation in the survey since January.
By sector, investors reported a net 8% overweight to utilities, the most since December 2008, and a net 17% underweight each to energy and materials, the most underweight to both since December 2020 and June 2020, respectively.
Meanwhile, bond allocations are a net 11% overweight in September, up from a net 8% overweight in August and the highest allocation reported since December.
The asset class seeing the largest drop was commodities, which fell to a net 11% underweight in September from a net 7% underweight in August. Allocations to commodities have now dropped a total of 24 percentage points from a net 17% overweight in May and represent the lowest allocation reported by managers since June 2017.
When asked what the biggest tail risk is, 40% said a U.S. recession, 19% said geopolitical conflict, 18% said the acceleration of inflation; 8%, systemic credit event; 6% U.S. election “sweep” (one party takes both White House and Congress); and 5%, AI bubble.
Managers were surveyed between Sept. 6 and Sept. 12.
