A year after COVID-19 was declared a global pandemic, investor sentiment is unambiguously bullish, with the coronavirus no longer being considered the top tail risk among fund managers and most investors saying the economy is facing a sharp recovery, according to Bank of America's February Global Fund Manager Survey.
Of the 197 fund managers overseeing a total of $597 billion in assets surveyed, a record net 91% of respondents expect a stronger economy. Meanwhile, a record net 89% of fund managers expect global profits to improve over the next 12 months, up 5 percentage points from February.
Expectations toward an economic recovery are bullish among fund managers, with 48% saying it's a V-shaped recovery vs. 10% in May. A net 66% of investors said they're expecting a steeper yield curve in 2021, down 16 percentage points from last month.
For the past 12 months, COVID-19 has been named the No.1 tail risk for investors. But for the first time since February 2020, it no longer tops the list. A higher-than-expected rate of inflation is the biggest tail risk for investors, with 37% of fund managers saying it's their biggest concern, followed by a "tantrum" in the bond market (35%), with the COVID-19 vaccine rollout (13%) coming in third.
A net 93% of respondents expect higher inflation in the next 12 months, up 7 percentage points from the month prior, bringing it to an all-time high.
Cash levels among surveyed money managers rose to 4% from 3.8%, the first rise since July.
Allocations to commodities among surveyed fund managers increased to net 28%, an all-time high.
A net 20% of survey respondents are currently taking higher than normal risk levels, down 5 percentage points from the previous month's record high.