By Vicki Schmelzer
NEW YORK (MaceNews) – COVID-19 vaccine hopes, U.S. election results and an increasingly positive world macro outlook boosted investor sentiment in November, according to the findings of BofA Global Research’s monthly fund manager survey, released Tuesday.
In November, a net 91% of fund managers looked for global growth to strengthen in the coming year, the “highest growth expectations ever,” the survey said. This compared to a net 82% and a net 84% looking for global growth strength in October and September respectively. 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 44% of those polled this month look for the global economy to get “a lot stronger,” the survey said.
In November, a net 23% looked for a V-shaped recovery, versus a net 63% looking for either a U-shaped or W-shaped recovery. In October, a net 19% of managers looked for a V-shaped recovery and a net 59% looked for either a U-shaped or W-shaped recovery.
Inflation expectations continued to rise, with a net 75% of fund managers looking for higher global CPI in the next 12 months. This compared to a net 66% with that view in October and September.
Average cash balances held at 4.1% in November, down from 4.4% in October and 4.8% in September. 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 7% overweight this month, the lowest level since April 2015. This compared to a net 23% overweight in October and a net 25% overweight in September. 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 November, a net 46% of those polled were overweight global equities, versus a net 27% overweight in October and a net 18% overweight in September.
April saw a net 27% underweight, which was the lowest allocation since March 2009.
This month, a net 50% of portfolio managers were underweight bonds, the lowest bond holdings since November 2018. This compared to a net 40% underweight in October and a net 35% underweight in September.
A net 7% of managers were overweight commodities, versus a net 8% overweight in October and a net 5% overweight in September. This is down from the net 12% overweight seen in August and July, which were the highest readings since July 2011.
On regional equity asset allocation, global investors added to U.S. and emerging market stock holdings, while trimming equity holdings in most other markets.
Allocation to U.S. stocks stood at a net 23% overweight in November, compared to a net 19% overweight in October and a net 18% overweight in September.
In November, a net 18% of managers were overweight eurozone stocks, compared to a net 26% overweight in October and a net 22% overweight in September.
Allocation to global emerging market equities saw managers with a 36% overweight, the highest since February 2020. This is up from a net 13% overweight in October and a net 16% overweight in September. Emerging markets currently are the “#1 one most preferred region,” the survey said.
This month, portfolio managers had a net 1% underweight to Japanese equities, compared to a net 4% overweight in October and a net 4% underweight in September.
UK equity allocations showed managers with a net 33% underweight in November versus a net 34% underweight in October and a net 35% underweight in September.
COVID-19 uncertainty remained the top tail risk for the ninth straight month, even as vaccine expectations were moved forward to mid-January 2021, from mid-February 2021.
In November, the biggest “tail risks” feared by portfolio managers were “COVID-19 second wave” (41% of those polled), “Tech bubble” (19%), “Civil Unrest” (15%), “Credit Event” (12%) and “U.S.-China trade war.”
In October, 34% of those polled saw a COVID-19 second wave as the top “tail risk,” up from 30% in September.
In November, the top “most crowded” trades deemed by managers 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 October, 71% of those polled saw “Long U.S. tech” as the “most crowded trade,” down from 80% in September.
An overall total of 216 panelists, with $573 billion in assets under management, participated in the BofA Global Research fund manager survey, taken November 6-12, 2020. “190 participants with $526bn AUM responded to the Global FMS questions and 88 participants with $176bn AUM responded to the Regional FMS questions,” BofA Global said.
Contact this reporter: vicki@macenews.com
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