By Vicki Schmelzer
NEW YORK (MaceNews) – In anticipation of a post-COVID-19 economic recovery in 2021, global investors began more markedly to put cash to work in December, according to the findings of BofA Global Research’s monthly fund manager survey, released Tuesday.
In December, a net 89% of fund managers looked for global growth to strengthen in the coming year, off only slightly from November when a net 91% had that view, the highest growth expectations since March 2002. Back in April, as COVID-19 jitters were increasing, a net 2% of those polled looked for weaker global economic growth.
In addition, a net 56% of those polled this month look for the global economy to get “a lot stronger,” up from 44% with that view in November, the survey said.
Inflation expectations continued to rise, with a net 79% of fund managers looking for higher global CPI in the next 12 months. This compared to a net 75% in November and a net 66% with in October and September.
Average cash balances stood at 4.0% in December, down from 4.1% in November and 4.4% in October. As a point of comparison, in April, cash balances stood at 5.9%, which was the highest level since the 9/11 terrorist attack.
Allocation to cash declined to a net 1% underweight in December, the lowest allocation since May 2013 and compared to a net 7% overweight in November and a net 23% overweight in October. April’s cash allocation, at a net 54% overweight, was the highest since October 2008 and the second highest reading in the survey history.
On overall asset allocation, in December, a net 51% of those polled were overweight global equities, up from a net 46% overweight in November and a net 27% overweight in October.
April saw fund managers with a net 27% underweight, which was the lowest allocation since March 2009.
This month, a net 56% of portfolio managers were underweight bonds, the lowest bond holdings since March 2018. This compared to a net 50% underweight in November and a net 40% underweight in October.
Global investors upped their commodities holdings to a net 18% overweight, the highest since April 2011. In contrast, a net 7% and net 8% of managers were overweight commodities in November and October respectively.
On regional equity asset allocation, global investors reallocated stock holdings out of the U.S. into other world markets.
Allocation to U.S. stocks stood at a net 15% overweight in December, down from a net 23% overweight in November and a net 19% overweight in October.
In December, a net 25% of managers were overweight eurozone stocks, compared to a net 18% overweight in November and nearly back to the 26% overweight seen in October.
Allocation to global emerging market equities saw managers with a 55% overweight, the highest since November 2010. This is up from a net 36% overweight in November and a net 13% overweight in October. Emerging markets remained the “#1 one most preferred region,” the survey said.
This month, portfolio managers had a net 4% overweight to Japanese equities, compared to a net 1% underweight in November and a net 4% overweight in October.
UK equity allocations showed managers with a net 18% underweight, versus a net 33% underweight in November and a net 34% underweight in October. December saw the largest month-on-month increase since October 2015, the survey said.
While COVID-19 uncertainty remained the top tail risk for the tenth straight month, inflation concerns crept onto the radar screen for the first time in many months.
In December, the biggest “tail risks” feared by portfolio managers were “COVID-19 second wave” (30% of those polled), “Inflation” (24%), “Fiscal policy drag” (18%), “Credit Event” (12%), and “U.S.-China trade war” (7.0%)
In November, the biggest “tail risks” were “COVID-19 second wave” (41% of those polled), “Tech bubble” (19%), “Civil Unrest” (15%), “Credit Event” (12%) and “U.S.-China trade war” (4.0%).
In December, the top “most crowded” trades deemed by managers were “Long U.S. tech” (52% of those polled), “Short U.S. dollar” (17%), “Long Bitcoin” (15%), “Long Corporate Bonds” (11%) and “Long Gold” (3%).
Last month, the top “most crowded” trades were “Long U.S. tech” (65% of those polled), “Short banks” (11%), “Long Corporate Bonds” (9%), “Long Gold” (5%), and “Long Bitcoin” (4.0%).
In a stand-alone question, fund managers were asked when the COVID-19 vaccine would start to positively impact the world economy. A net 42% of investors said Q2 2021, a net 28% said Q1 2021, a net 19% said Q3 2021, with the remaining 11% looking for the positive effects to take longer.
“FMS investors on average expect the vaccine to positively impact the economy by May 2021,” the BofA Global survey said.
An overall total of 217 panelists, with $576 billion in assets under management, participated in the BofA Global Research fund manager survey, taken December 4th to 10th 2020. “190 participants with $534bn AUM responded to the Global FMS questions and 89 participants with $159bn AUM responded to the Regional FMS questions,” BofA Global said.
—
Contact this reporter: vicki@macenews.com
Stories may appear first on the Mace News premium service. For real-time email delivery contact tony@macenews.com. Twitter headlines @macenewsmacro