By Vicki Schmelzer
NEW YORK (MaceNews) – Growth expectations and inflation concerns stabilized in November, to the benefit of equities and bonds, according to the findings of BofA Global Research’s monthly fund manager survey, released Tuesday.
A net three percent of those polled this month looked for stronger world economic growth in the coming year, compared with a net six percent who looked for weaker growth in October. Still, this is a far cry from March when a net 91% looked for stronger world growth, the survey said.
“Only 6 out of 100 investors believe there will be a recession in the next 12 months,” the survey said.
Inflation jitters dropped markedly in November, with a net 14% of investors looking for lower global consumer price inflation in the coming 12 months, versus a net 1% looking for lower global inflation last month. This is in sharp contrast to April and March, when a record 93% of those polled looked for higher inflation.
This month, a net 61% of fund managers saw inflation as transitory, versus a net 58% in October and a net 69% in September. In November a net 35% said inflation was permanent, versus a net 38% and 28% respectively with that view in October and September.
Inflation and Federal Reserve monetary policy action remained tied neck and neck as the number one drivers of asset markets in 2022.
In terms of Fed rate hikes for next year, in November 39% of managers looked for two increases, 37% said one increase, 13% said no increases, 8% said three increases and 1% said four increases. Last month, 24% looked for two rate hikes, 44% looked for one hike, 24% looked for steady policy, 3% looked for three hikes and 1% said four hikes.
“Investors are not expecting the Fed to tighten aggressively (i.e. buy-in for Powell narrative on transitory inflation and modest tapering),” BofA Global said.
In terms of portfolio holdings, average cash balances fell to 4.4% in November, compared to 4.7% in October and 4.3% in September.
Allocation to cash fell to a net 22% overweight in November, down from net 27% overweight in October, which was the highest since July 2020, the survey said.
Global investor allocation to commodities edged down to a net 26% overweight this month, compared to a net 28% overweight in October and a net 18% overweight in September.
A net 58% of portfolio managers were overweight global equities in November, up from a net 50% in October and September and at the highest level since June, the survey said. These levels compare to the record highs near 70%, seen in 2011.
This month, a net 69% of managers were underweight bonds, back at September levels and down from a net 80% underweight in October, which was the largest bond underweight ever.
On regional equity asset allocation, global investors “got more bullish on the U.S. as inflation fears waned,” the survey said.
Allocation to U.S. stocks rose to a net 29% overweight in November, the highest level since August 2013, and compared to a net 16% overweight in October and a net 10% overweight in September.
This month, a net 33% of managers were overweight eurozone stocks, compared to a net 34% overweight in October and a net 38% overweight in September.
Fund managers added to their global emerging market (GEM) stock holdings, with investors having a 2% underweight in November versus a net 5% underweight in October, and back at September levels. Current levels are well down from the record net 62% overweight seen in January.
Managers polled saw EM equities and the S&P 500 as producing the best returns in 2022, followed by bitcoin, oil and gold.
Portfolio managers had a net 7% overweight to Japanese equity markets this month, unchanged from October and compared to a net 1% underweight in September.
UK equity allocations showed managers with a net 15% underweight, compared to a
net 12% underweight in October and a net 4% underweight in September.
In November, the biggest “tail risks” feared by portfolio managers were: “Inflation” (33% of those polled), “Central bank rate hikes” (22%), “China” (20%). “Asset bubbles” (16%), “COVID-19” (5%) and “US fiscal cliff” (1%).
In October, the biggest “tail risks” were: “Inflation” (48% of those polled), “China” (23%), “Asset bubbles” (9%), “Fed taper” (9%), “COVID-19 delta variant” (3%) and “US fiscal policy” (3%).
In November, the “most crowded” trades deemed by managers were: “Long Tech Stocks” (37% of those polled), “Long Bitcoin” (21%), “Long ESG” (14%), “Short US Treasuries” (13%), “Short China and EM stocks” (8%) and “Long oil” (5%).
In October, the “most crowded” trades were: “Long Tech Stocks” (35% of those polled), “Long ESG” (17%), “Short China and EM” (14%), “Long Bitcoin” (10%), “Long Oil” (10%), and “Short US Treasuries” (9%).
An overall total of 388 panelists, with $1.2 trillion in assets under management, participated in the BofA Global Research fund manager survey, taken November 5-11 2021. “345 participants with $1.1trn AUM responded to the Global FMS questions and 188 participants with $710bn AUM responded to the Regional FMS questions,” BofA Global said.
Contact this reporter: vicki@macenews.com
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