By Vicki Schmelzer
NEW YORK (MaceNews) – Global investors added to cash and equity positions and pared bonds in July, in a recalibrating of current holdings more than a shift in mindset, according to the findings of Bank of America Global Research’s monthly fund manager survey, released Tuesday.
Investor fear is still exceeds greed, the survey said, with “Fearflation” still positive for risk assets.
This month, a net 60% of those polled looked for weaker economic growth in the coming year, compared to a net 62% in June and a net 65% in May. This compares to July of 2022, when at the peak of global growth concerns, a net 79%, a record high, were looking for weaker growth.
A net 48% of global investors look for the start of a global recession by the end of Q1 2024, but “conviction” is still “very much solidifying around ‘soft landing’ (68%), while expectations for ‘hard landing’ fading (21%) and 4% expect ‘no landing’,” the survey said.
On the inflation front, this month a net 78% of fund managers looked for lower global CPI in the coming 12 months, compared to a net 87% in June and a net 84% in May. This is still well below the record high of 90%, seen in December 2022.
In terms of asset allocation, global investors added to equity and cash positions and pared bond longs.
In July, a net 24% of portfolio managers were underweight global equities, compared to a net 32% underweight in June and a net 24% underweight in May. In September 2022, fund managers held a record 52% underweight in stocks.
A net 3% of managers were overweight bonds in July, down from a net 11% overweight in June and a net 14% overweight in May, which was the highest bond allocation since March 2009.
“Seven of the last eight months have seen overweight bond allocation, after a 14-year streak of underweight allocation,” BofA Global said.
Allocation to cash nudged up to a net 32% overweight, compared to a net 31% overweight in June and a net 44% overweight in May.
Average cash balances stood at 5.3% in July, versus 5.1% in June and 5.6% in May.
This month, commodity allocation fell to a net 9% underweight, compared to a net 3% underweight in June and a net 2% overweight in May.
On regional equity allocation, global investors added to U.S. and Emerging Market holdings, while paring back stocks in other regions.
Allocation to U.S. stocks stood at a net 10% underweight in July, the highest allocation of 2023 and compared to a net 25% underweight in June and a net 39% underweight in May.
This month, a net 1% of managers were overweight eurozone stocks, compared to a net 3% overweight in June and a net 4% overweight in May.
Allocation to GEM stood at a net 23% overweight in July, compared to a net 13% overweight in June and a net 24% overweight in May.
Allocation to Japanese equities stood at a net 3% underweight in July versus a net 4% overweight in June and UK allocation stood at a net 21% underweight this month compared to a net 17% underweight in June.
In July, the biggest “tail risks” feared by managers were: “High inflation keeps central banks hawkish” (45% of those polled), “Bank credit crunch and global recession” (18%), “Geopolitics worsen” (15%), “AI/tech bubble” (11%) and “Systemic credit event” (10%).
In June, the biggest “tail risks” were: “High inflation keeps central banks hawkish” (36% of those polled), “Bank credit crunch and global recession” (22%), “Geopolitics worsen (e.g. Russia/Ukraine, China/Taiwan)” (17%), “Systemic credit event” (13%) and “AI/tech bubble” (9%).
In July, the “most crowded” trades deemed by global managers were: “Long Big Tech” (59% of those polled), “Long Japan equities” (14%), “Short China equities” (8%), “Long T-Bills” (5%), “Short U.S. dollar” (5%) and “Short U.S. banks” (2%)
In June, the “most crowded” trades were: “Long Big Tech” (55% of those polled), “Short China equities” (13%), “Long Japan equities” (8%), “Short U.S. dollar” (6%), “Long T-bills: (6%) and “Short U.S. banks” (4%).
An overall total of 262 panelists, with $652 billion in assets under management, participated in the BofA Global Research fund manager survey, taken July 6 to July 13, 2023. “222 participants with $588bn AUM responded to the Global FMS questions and 145 participants with $257bn AUM responded to the Regional FMS questions,” BofA Global said.
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