Fund managers’ bullishness experienced the highest monthly jump in four years in October following the Fed’s rate cut the previous month, according to the results of Bank of America’s latest Global Fund Manager survey.
In the survey of 231 fund managers overseeing a total of $574 billion in assets, the broadest measurement of sentiment — which is based on cash levels, economic growth expectations and equity allocations — rose to 5.6 from 3.8 in September, the largest monthly rise since June 2020. 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 3.9% in September, the lowest level since February 2021, from 4.2% in August.
In its summary of survey results, Bank of America cited the Sept. 18 action by the Federal Open Market Committee to lower the federal funds rate by 50 basis points to a range of 4.75% to 5% as a primary driver for the improved sentiment.
Perhaps the most dramatic improvement in sentiment was reflected in global growth expectations over the next 12 months. In the October survey, a net 10% of fund managers said they expected a weaker economy during the upcoming year, down from a net 47% in September.
It was the fifth largest month-over-month jump in global growth expectations since Bank of America began conducting the survey in 1994.
When asked for the most likely outcome for the global economy over the next 12 months, 76% of respondents said “soft landing,” while 14% said “no landing” and 8% said “hard landing.” The remaining 2% responded with other unlisted answers.
The biggest jump in allocations among surveyed managers was global equities to a net 31% overweight in October from a net 11% overweight in September, while the biggest drop came in bonds, which landed at a net 15% underweight in October from a net 11% overweight in September.
When asked what the biggest tail risk is, 33% said geopolitical conflict (up from 19% in September); 26% said global inflation scenario (up from 18%); 19%, U.S. recession (down all the way from 40%); 14%, U.S. election “sweep” (one party takes both White House and Congress, up from 6%); and 5%, systemic credit event (down from 8%).
Managers were surveyed between Oct. 4 and Oct. 10.
