Fund managers sour on global growth outlook – BofA survey

Investors continue to see a decline in global growth expectations, while profit expectations have plummeted on a month-over-month basis in Bank of America's September Global Fund Manager Survey.

Of the 258 fund managers overseeing a total of $839 billion in assets surveyed, expectations of improving global growth dropped to a net 13% in September, down 14 percentage points from August and down from a peak of 91% in March.

Expectations that profits will improve plummeted to a net 12% among survey respondents, down 29 percentage points from August and down from the 89% peak in March.

Fund managers also indicated that "peak inflation" has been reached, with those expecting higher inflation in the next 12 months dropping to a net -1% in September, down from a net 4% in August and a peak of 93% in April.

The report on the survey notes that fund manager responses indicate the global economy has reached "peak boom" as well as their growing concerns on stagflation. Recession concerns, however, remain low. Sixty-six percent of investors still expect above-trend growth and above-trend inflation, down 3 percentage points month-over-month and from a peak of 76% in June.

Investors are also slightly more willing to take on additional risk this month, although the appetite remains low. A net 9% of investors are taking "higher-than-normal" risk in September, up from 3% in August, but down from a high of 25% in February.

Inflation tops the list of biggest tails risks for fund managers, at 24%, followed by a "taper tantrum" at 19% and the delta variant of the coronavirus at 17%.

Cash levels inched up month over month to 4.3% in September from 4.2% in August.

Asset allocation to equities dropped 4 percentage points month-over-month to a net 50% overweight. The allocation is down from a peak net 62% in April.