By Vicki Schmelzer
NEW YORK (MaceNews) – Global growth expectations withered further in September, according to the findings of BofA Global Research’s monthly fund manager survey, released Tuesday.
Even though world growth expectations declined again this month, investors made only mild tweaks in their equity and bond portfolios.
A net 13% of those polled in September looked for stronger world economic growth this year, compared to a net 27% in August and a net 47% in July and a far cry from the net 91% peak seen in March and February, the survey said.
Inflation concerns have been wiped away, with a net -1% of managers looking for higher global CPI in the coming 12 months, versus a net 4% in August and compared to the record net 93% seen in April and March.
“Short-term rate expectations however remain elevated and lag inflation expectations more than historically,” the survey said.
In September, a net 69% of those polled saw inflation as transitory versus a net 28% saying that it is permanent. Last month, a net 65% saw inflation as transitory, with a net 32% stating that inflation is permanent.
In terms of portfolio holdings, average cash balances nudged up to 4.3% this month, from 4.2% in August and 4.1% in July, according to BofA Global.
Allocation to cash rose by 0.2% to a net 15% overweight, which was the highest since October 2020, the survey said.
Global investor allocation to commodities stood at a net 18% overweight, compared to a net 17% overweight in August and a net 29% overweight seen in July, which was the highest reading ever, BofA Global said.
A net 50% of portfolio managers were overweight global equities in September, compared to a net 54% in August and a net 58% in July. These levels compare to the record highs near 70% seen in 2011.
This month, a net 69% of managers were underweight bonds, little changed from the net 67% underweight in August and the net 68% underweight in July.
In terms of Federal Reserve policy, a net 84% of those polled in the latest survey expect the Fed to signal its willingness to taper asset purchases by year-end.
A net 49% of those polled that the Delta variant would be the “most likely reason that will prevent the Fed from tapering in the next 6 months.” A net 36% think weak payrolls and a net 7% said inflation concerns would delay Fed tapering.
On regional equity asset allocation, global investors made only modest adjustments in their holdings, with emerging markets seeing the greatest change.
Allocation to U.S. stocks slipped to a net 10% overweight in September versus a net 11% overweight in August and July.
This month, a net 38% of managers were overweight eurozone stocks, up from a net 36% in August but down from a net 45% in July, which was the highest since January 2018.
A net 36% of managers were overweight eurozone stocks, down from a net 45% in July, which was the highest since January 2018 and compared to a net 41% overweight in June.
Fund managers reduced global emerging market (GEM) holdings to a net 2% underweight, the lowest since May 2020 and compared to a net 3% overweight in August and a net 14% overweight in July. This is well down from the record net 62% overweight seen in January.
Portfolio managers had a net 11% underweight to Japanese equity markets this month, compared to a net 12% underweight in August and a net 6% underweight in July.
UK equity allocations showed managers with a net 4% underweight in September compared to a net 2% underweight in August and a net 1% overweight in July.
In September, the biggest “tail risks” feared by portfolio managers were: “Inflation” (24% of those polled), A “taper tantrum” (19%), “COVID-19 delta variant” (17%), “Asset bubbles” (15%), “China policy” (11%) and “Geopolitical risk” (9%).
In August, the biggest “tail risks” were: “Inflation” (22% of those polled), “A ‘taper tantrum’” (20%), “COVID-19 delta variant” (19%), “Asset bubbles” (17%) and “China policy” (16%).
In September, the “most crowded” trades deemed by managers were “Long Tech Stocks” (40% of those polled), “Long ESG” (22%), “Short China Stocks” (15%), “Long Bitcoin” (11%), “Long U.S. Treasuries” (6%) and “Long Commodities” (3%).
Last month, the “most crowded” trades were: “Long Tech Stocks” (40% of those polled), “Long ESG” (20%), “Short China Stocks” (11%), “Long U.S. Treasuries” (10%), “Long Bitcoin” (9%), and “Long Commodities” (7%).
Contact this reporter: vicki@macenews.com.
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