Investors are feeling optimistic about the stock market, with most not expecting a recession in the next 12 months, according to the latest Global Fund Manager Survey conducted by Bank of America. The report, released on Tuesday, shows that sentiment is at its highest level since November 2021, driven by expectations of decreasing inflation and potential cuts to short-term interest rates.
The survey, which gathered insights from over 200 financial experts, including portfolio managers, analysts, economists, and chief investment officers, revealed significant shifts in market sentiment and asset allocation. The majority of investors, 64%, do not anticipate a recession in the next year, with only 19% expecting one in the first half of 2025 and 14% predicting one in 2024.
One key factor fueling this bullish outlook is the expectation of lower interest rates in the coming months. A dominant 83% of investors anticipate a decrease in short-term interest rates, up from 81% in April. This sentiment is supported by a rise in the number of investors predicting a decrease in inflation, with 69% expecting lower inflation compared to 63% in the previous month.
Investors are also showing confidence in the market through their asset allocations, with cash levels decreasing to 4% of assets under management, the lowest level since June 2021. Stock allocations are at their highest since January 2022, with fund managers being net 41% overweight in equities.
Despite the overall positive outlook, investors are mindful of potential risks, with higher inflation remaining the top concern for 41% of respondents. Geopolitical concerns and the risk of an economic hard landing are also on investors’ radar. In response to these risks, some investors are shifting towards commodities, with allocations to commodities seeing a sharp increase.
Overall, the survey highlights a mix of optimism and caution among investors, with a focus on policy expectations, asset allocations, and potential risks in the market. As investors navigate these dynamics, they are also keeping an eye on opportunities for contrarian trades and potential areas of growth in the market.
