Investors remain bearish about the global economy, but their level of dread is abating as hopes rise, and inflation and interest rate shocks are beginning to end, according to the results of Bank of America's August Global Fund Manager Survey.
Of the 284 surveyed fund managers, which oversee a total of $836 billion in assets, expectations of global growth were at a net -67% in August, up from -79% in July, which had marked a new low in the history of the survey.
Also, a net 72% among survey respondents expect global profits to decline over the next month, down from a net 79% in July, which was the highest mark since October 2008.
Inflation remaining high tops the list as the biggest tail risk for managers at 39% (up from 33% in July), followed by a global recession at 24% (equal to July), hawkish central bank increases at 16% (down from 17% in July), systemic credit events at 8% (10% in July), a COVID-19 resurgence at 4% (equal to July), and the Russia-Ukraine conflict at 3% (down from 7% in July).
When asked how they see the global economy trending over the next 12 months, 90% said they expect stagflation (below-trend growth and above-trend inflation), the same response as in July, the highest percentage in the history of the survey.
Also, investors' cash levels came down to 5.7% in August from 6.1% in July, well above the long-term average of 4.8%.
Only 5% of fund managers expect a global economic boom (above-trend growth and inflation) over the next 12 months, equal to July.
In addition, a net 47% of respondents said they are currently taking lower-than-normal risk levels, down from a net 57% in July, which had been the highest level recorded in the history of the survey.
Asset allocation to U.S. equities increased to a net 10% overweight in August's survey from 5% underweight in July. The allocation had been as high as a net 55% overweight as recently as January following a peak of a net 62% overweight in April 2021.
Managers were surveyed between Aug. 5 and Aug. 11.
