Fund managers remain bearish regarding global growth but are growing more bullish regarding China reopening from COVID-19 lockdowns as well as inflation, according to the results of Bank of America's December Global Fund Manager Survey.
Of the 319 surveyed fund managers, which oversee a total of $815 billion in assets, expectations of global growth were at a net -69% in December, a slight improvement from -73% in November. While those expectations remain bearish in line with the past few months of surveys, that level of pessimism remains stable because 74% of surveyed managers believe China will reopen fully by the end of 2023.
Also, a net 75% of managers in the December survey forecast a stronger China economy in 2023, up significantly from a net 13% in November and the most optimistic survey result since May 2021. That optimism was also reflected by a net 51% expecting the U.S. dollar to depreciate the most, the highest such result for the survey since May 2006.
Meanwhile, profit expectations improved slightly, with a net 74% of investors expecting global profits to decline over the next 12 months, down from 83% in November. While the number remains high, a record net 90% of surveyed managers believe that global inflation will be lower within the next 12 months, a result that also is driving up expectations for lower short-term rates.
A total of 42% of surveyed managers are expecting short-term yields to fall, which is the highest response since March 2020.
And as risk sentiment begins to ease, cash levels dropped to 5.9% in December, down from 6.2% in November and 6.3% in October. The long-term average cash level for the fund manager survey is 4.9%.
Despite the growing sentiment it will drop in the next 12 months, inflation remains at the top of the list of biggest tail risks for managers for the sixth month in a row at 37% (up from 32% in November), followed by a deep global recession at 20% (up from 18%), hawkish central banks at 16% (down from 18%) and worsening geopolitics at 12% (down from 18%).
Managers were surveyed between Dec. 2 and Dec. 8.