Global investors are feeling less pessimistic about the global economy over the next 12 months and the vast majority believe the Federal Reserve has ended its rate-hiking cycle, according to the Bank of America December Global Fund Manager Survey released Dec. 19.
The broad measure of sentiment is based on cash positions, equity allocations and economic growth expectations, the survey said.
The survey cited equity allocations for December, which jumped 13 percentage points from November's net 2% overweight to net 15% overweight. It was the biggest monthly jump since November 2022.
Cash levels fell to a net 4.5% in December from 4.7% the previous month, within what Bank of America deems a "normal" 4% to 5% range.
Still, growth expectations remain pessimistic, with a net 50% of surveyed investors are expecting the global economy to weaken over the next 12 months. But that is an improvement over the net 57% that expressed the expectation for weakness in November. The percentage has waffled over the last few months: A net 50% expressed that sentiment in October, down from 53% in September, which was up from 45% in August.
Of the surveyed investors, 91% said the Fed has finished the rate-hiking cycle.
Investors were also asked when they expect a recession, and 36% said they expect no recession at all in the next 12 months while 32% expect the U.S. to fall into recession in the second quarter.
When asked what the overall largest tail risk is, 32% said a global recession/hard landing; 27%, high inflation keeping central banks hawkish; 17%, worsening geopolitics; 9%, systemic credit event; 7%, U.S. election; and 4%, China banking crisis.
The poll surveyed 254 participants with $691 billion in assets under management and was conducted Dec. 8-14.
