Fund managers remain bearish, with just less than half saying they believe a mild recession will begin in the fourth quarter or first quarter of 2024, according to the results of Bank of America's July Global Fund Manager Survey.
Of the 262 surveyed fund managers, which oversee a total of $652 billion in assets, 48% predict a global recession will begin by the end of the first quarter of 2024, of which 25% say it will begin during the first quarter and 23% say it will begin during the fourth quarter. Among the respondents asked about a recession, 19% say there will be no recession of any kind during the next 18 months, which is up from 14% that expressed that sentiment in June.
The survey is also showed a significant percentage — 68% — anticipating a "soft landing," while 21% anticipate a "hard landing."
Also according to the survey, managers increased their equity allocations to a net 24% underweight, up 8 percentage points from June and back to the level that managers disclosed in the May survey. Managers also hiked allocations to real estate by 5 percentage points to a net 12% underweight and allocations to cash by 1 percentage point to a net 32% overweight.
Meanwhile, bond allocations dropped 8 percentage points from June to a net 3% overweight. Also, the allocation to commodities fell 6 percentage points from a month earlier to a net 9% underweight, bringing that asset class to its lowest level since May 2020. Also, over the past three months, the allocation to commodities has plummeted by a total 22 percentage points, the largest such decline over three months since 2013.
When asked to identify the biggest tail risk, 45% said high inflation keeping central banks hawkish, a dramatic rise from 36% of managers that said that was the biggest tail risk in June.
Other tail risks were: Bank credit crunch and global recession, at 18% (down from 22% in June); worsening geopolitics, 15% (down from 17%); AI/tech bubble, 11% (up from 9%); and systemic credit event, 10% (down from 13%).
The survey was conducted between July 6 and July 13.
