Global investor sentiment on the economy remains unambiguously bullish, according to Bank of America's May Global Fund Manager Survey.
Of the 194 fund managers overseeing a total of $592 billion in assets surveyed, 69% said they expect "above-trend" growth and inflation, a record high.
A net 84% expect a stronger economy, and a net 78% expect global profits to improve over the next 12 months. Although both survey results are each down 6 percentage points from last month, they're still near all-time highs.
A net 83% of respondents said they expect higher inflation in the next 12 months, down 10 percentage points from last month but still high. Meanwhile, more fund managers — a net 63% — are expecting higher short-term rates, up 6 percentage points from April.
Cash levels among surveyed money managers held steady at 4.1%.
In a sign that fund managers are becoming more defensive and positioning themselves for inflation, asset allocation to commodities and cash are up, while allocation to equities are down.
A little over a year after COVID-19 was named a global pandemic, only 9% of fund managers surveyed cited COVID-19 risk as the biggest tail risk. Inflation now tops the list of biggest potential tail risks, at 35%, followed by a "taper tantrum" (27%) and asset bubble (15%).