Macro and market optimism among the global investment community remains quite high, with most investors bullish on the economy's future, according to Bank of America's April Global Fund Manager Survey.
Of the 200 fund managers overseeing a total of $553 billion in assets surveyed, 50% say the economy is experiencing a V-shaped recovery, vs. only 10% believing that in May. Meanwhile, 37% now think the economy is facing a U- or W-shaped recovery, vs. 75% in May.
Only 7% of investors think the U.S. equity market is in a bubble, while 25% think it's an early stage bull market and 66% believe it's a late-stage bull market.
A net 90% of respondents expect a stronger economy in the next 12 months, down 1 percentage point from last month, with 64% of respondents expecting the global economy to get "a lot stronger," up 1 percentage point from last month. A net 85% of respondents expect global profits to improve over the next 12 months, still near all-time highs despite being down 4 percentage points from March.
A net 93% of survey respondents expect higher inflation in the next 12 months, flat month-over-month, but still at all-time highs. Meanwhile, more fund managers — a net 57% — are expecting higher short-term rates, up 8 percentage points from March.
Most survey respondents (57%) believe that higher growth-higher inflation has surpassed "peak Goldilocks" of higher growth-lower inflation. This has happened only two other times: March 2011 and December 2016.
Cash levels among surveyed money managers rose to 4.1% from 4%.
In a sign that investors are continuing to be more risk-on, a net 62% of survey respondents said they are net overweight to equities, which is close to all-time highs. Meanwhile, fund manager optimism on commodities has peaked and fallen to a net 23%, down 5 percentage points from its all-time high of 28% in March.
A little over a year after COVID-19 was named a global pandemic, only 15% of fund managers surveyed cited COVID-19 risk as the biggest tail risk. A "Taper Tantrum" now tops the list of biggest potential tail risks, at 32%, followed by inflation (27%) and higher taxes (15%).