–Lowest Bond Holdings Since March 2018
By Vicki Schmelzer
NEW YORK (MaceNews) – Investors, anticipating a sharper rebound in global economic activity in 2021, put monies to work in February, according to the findings of BofA Global Research’s monthly fund manager survey, released Tuesday.
A net 91% of those polled looked for stronger economic growth this year, with a majority (34%) now looking for a V-shaped recovery. In contrast, back in April 2020, as COVID-19 fears were rising, a net 2% of those polled looked for weaker global economic growth. Nine months ago, a mere 10% of investors saw scope for a V-shaped recovery, the survey said.
Growth optimism saw average cash balances fall to 3.8% in February, the “lowest since Mar’13 (just before Bernanke ‘taper tantrum’)” from 3.9% and 4.0% in January and December, respectively. As a point of comparison, in April 2020 average cash balances stood at 5.9%, which was the highest level since the 9/11 terrorist attack.
Despite fervor about economic recovery, global investors tempered their views about higher inflation and a steeper yield curve.
In February, a net 86% of fund managers looked for higher global CPI in the coming 12 months, down from a record net 92% in January. A net 82% of those polled looked for a steeper yield curve in the coming year, down from the record net 83% seen in January, when the percentage was “higher than 2008 Lehman bankruptcy, 2013 Fed Taper Tantrum and 2016 U.S. Election,” the survey said.
Allocation to cash rose to a net 1% overweight this month from a net 1% underweight in January, which was the lowest level since May 2013. April 2020’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 February, a net 61% of portfolio managers were overweight global equities, the second highest ever and compared to the record highs near 70% seen in 2011. Last month, a net 53% of those polled were overweight.
This month, a net 62% of portfolio managers were underweight bonds, the lowest bond holdings since March 2018. This compared to a net 59% underweight in January and a net 56% underweight in December.
Global investor allocation to commodities rose to a net 25% overweight, the highest since February 2011. This is up from a net 19% overweight in January and a net 18% overweight in December.
In February, cash levels were at an eight-year low, with equity and commodity allocations the highest since 2011, which was “the last year both had negative returns,” the survey noted.
On regional equity asset allocation, global investors moved back into U.S. equities, at the expense of eurozone and emerging markets, after shunning the region in prior months.
Allocation to U.S. stocks stood at a net 9% overweight in February, up from a net 4% overweight in January, but down from a net 15% overweight in December.
This month, a net 20% of managers were overweight eurozone stocks, down from a net 29% overweight in January and a net 25% overweight in December.
Global emerging markets remained the preferred region for investors, albeit somewhat less so than last month. Fund managers had a net 57% overweight to GEM in February, down from the record net 62% overweight seen in January and nearly back at the net 55% overweight seen in December.
This month, portfolio managers had a net 8% overweight to Japanese equities, the largest overweight in two years. This was up from a net 6% overweight in January and a net 4% overweight in December.
UK equity allocations showed managers with a net 10% underweight in February, up from a net 15% underweight in January and a net 18% underweight in December. This is nevertheless greatly improved from the net 34% underweight seen last October.
In February, the biggest “tail risks” feared by portfolio managers were “COVID-19 rollout” (28% of those polled), “A ‘tantrum’ in the bond market” (25%), “Higher than expected inflation” (24%), and “A bubble on Wall Street” (13%).
Last month, the biggest “tail risks” were: “COVID-19 rollout” (30% of those polled), “A ‘tantrum’ in the bond market” (29%), “A bubble on Wall St” (18%) and “Inflation” (14%).
In February, the top “most crowded” traders deemed by managers were: “Long Tech” (35% of those polled), “Long Bitcoin” (27%), “Short U.S. dollar” (13%), and “Long ESG” (13%). Note ESG stands for Environmental, Social and Governance and refers to a class of investment also known as “sustainable investing.”
Last month, the top “most crowded” trades were: “Long Bitcoin” (36% of those polled), “Long Tech” (31%), “Short U.S. dollar” (23%) and “Long Corporate Bonds” (4%).
An overall total of 225 panelists, with $645 billion in assets under management, participated in the BofA Global Research fund manager survey, taken February 5-11, 2021. “204 participants with $614bn AUM responded to the Global FMS questions and 84 participants with $142bn AUM responded to the Regional FMS questions,” BofA Global said.
Contact this reporter: vicki@macenews.com
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