Fund managers are still very bearish on the economy, and the vast majority predict stagflation in 2023, according to the results of Bank of America's November Global Fund Manager Survey.
Of the 309 surveyed fund managers, which oversee a total of $854 billion in assets, expectations of global growth were at a net -73% in November, compared with -72% in October. Meanwhile, profit expectations improved slightly, with a net 77% of investors expecting global profits to decline over the next month, down from 83% in October and a 14-year high of 92% in September.
When asked how they see the global economy trending over the next 12 months, 92% said they expect stagflation (below-trend growth and above-trend inflation), up from 91% in October. The November response equals the September response, which had been the highest percentage in the history of the survey.
The continued bearish sentiment kept cash levels high at 6.2% in November, although that was down slightly from 6.3% in October. The long-term average cash level for the fund manager survey is 4.9%.
Inflation remains at the top of the list of biggest tail risk for managers for the fifth month in a row at 32% (up from 27% in October), followed by worsening geopolitics and hawkish central banks and a deep global recession, all at 18% each. Percentages were not provided for the latter categories in October.
Also, 42% of respondents in November said bond yields will be lower in the next 12 months vs. 40% expecting yields to rise, the first time in the history of the survey more respondents have predicted lower yields than higher yields. Also, a net 8% of respondents expect the yield curve to steepen in the next 12 months, the highest response since November 2021. The previous month's response was not provided.
In addition, a net 56% of respondents said they are currently taking lower-than-normal risk levels, the same as in October.
Managers were surveyed between Nov. 4 and Nov. 10.