Global investors are leaning slightly more bearish once again after months of waning pessimism, according to Bank of America October Global Fund Manager Survey released Oct. 18.
The broad measure of sentiment is based on cash positions, equity allocation and economic growth expectations, the survey said.
The survey cited cash levels jumping to a net 5.3% in September from 4.9% the previous month, now above what Bank of America deems a "normal" 4% to 5% range, although it remains well below the "max bear" level of 6.3% reported in October 2022.
Growth expectations remain pessimistic, with a net 50% of surveyed investors expecting the global economy to weaken over the next 12 months. That percentage has waffled over the last few months, with a net 53% expressing that sentiment in September, which was up from 45% in August, which was down from 60% in July.
Equity allocations for October fell 1 percentage point from September's net 3% underweight to a net 4% underweight, according to the survey. In September, equity allocations represented the highest recorded by the survey since April 2022.
Investors were also asked when they expect a recession, and 25% expect a recession sometime in the next 18 months, down from 27% that responded with that answer in September, while 44% expect a recession to begin specifically in the first half of 2024, up from 36% in September, and 20% expect a recession to begin specifically in the second half of 2024. Five percent expect a recession to begin before the end of this year.
Meanwhile, 59% of investors say they expect a "soft landing" for the economy over the next 12 months, down from 64% in September. The percentage of those expecting a "hard landing" increased to 30% in October from 21% the previous month.
When asked to identify the biggest tail risk, 31% of managers said high inflation keeping central banks hawkish, the highest response, although down from 40% that expressed that belief in September, while 23% cited worsening politics (equal to September); 21%, global recession/hard landing (up from 13%); systemic credit event, 15% (up from 13%); AI/tech bubble, 4% (down from 10%); and China real estate bust, 3% (down from 8%).
The poll surveyed 295 participants with $736 billion in assets under management and was conducted Oct. 6-12.
