Global fund managers have come down from post-U.S. election euphoria as fears over Trump administration tariffs and inflation concerns have risen in January, according to the results of Bank of America’s latest Global Fund Manager survey.
In the survey of 214 fund managers with a total of $576 billion in assets under management, the broadest measurement of sentiment — which is based on cash levels, economic growth expectations and equity allocations — fell to 6.1 in January from 7.0 in December. The December survey, the first completed since the election of Donald Trump, had represented the survey’s highest level of optimism since August 2021 and the largest monthly rise in sentiment since June 2020.
In January, global growth expectations over the next 12 months fell to a net 8% expecting a weaker economy, down from a net 7% expecting a stronger economy in December. The survey report said optimism fell for both the U.S. and China.
Cash levels remained steady at 3.9% of AUM in January, the same as December, and a net 7% of surveyed managers said they expect inflation to be lower in 12 months, the worst sentiment in the survey since March 2022. Meanwhile, a net 59% of managers are expecting lower short-term interest rates, which is the lowest response since July 2023.
Managers also said they are rotating to European equities from U.S. equities, reporting a net 1% overweight to European equities in January (up from a net 22% underweight), while reporting a net 19% overweight to U.S. equities in January (down from 36% in December).
When asked what the biggest tail risk is, 41% of manager said inflation causing the Federal Reserve to raise rates (up from 37% in December), followed by 28% saying a trade war triggering a global recession (down from 37% in December); 10%, new geopolitical conflicts (the same as December); 9%, an artificial intelligence bubble (no response in December); and 8%, a systemic credit event (up from 4% in December). The remaining respondents gave other responses.