–Cash Levels Lowest Since 2010
By Vicki Schmelzer
NEW YORK (MaceNews) – Global investors embraced an upbeat world growth outlook in February, as evidenced by the lowest cash level holdings since 2010, according to BofA Global Research’s monthly fund manager survey, released Tuesday.
Eighty-two percent of those polled this month said a global recession was unlikely in the coming 12 months, versus 16% who looked for recession.
“Note that it has taken three years for global recession expectations to retrace back to their pre-Ukraine/NATO/Russia war level (Feb’22),” BofA Global said.
A net 4% looked for lower global inflation in the coming year, “the highest inflation expectations since Oct’21,” the survey said.
Cash levels declined from 3.9% in January to 3.5% in February, the lowest since 2010.
Cash allocation fell to a net 6% underweight this month, compared to a net 11% underweight in January.
In terms of asset allocation, global investors added to bond, real estate and commodity holdings while paring equities.
In February, a net 35% of portfolio managers were overweight global equities, compared to a net 41% overweight in January and a net 49% overweight in December.
A net 11% of those polled were underweight bonds, compared to a net 20% underweight in January and a net 15% underweight in December.
Allocation to real estate stood at a net 6% underweight this month, compared to a net 9% underweight in January and a net 7% underweight in December.
Commodity allocation held at a net 2% underweight in February, compared to a net 6% underweight in January and a net 12% underweight in December.
Fund managers were asked about the best performing global asset class for the coming year.
In February, 34% said global equities would outperform, 22% said gold would outperform and 18% said U.S. equities would outperform.
Last month, 21% said global equities would outperform, while 14% said Bitcoin, the survey said.
Sentiment was little changed in terms of overall U.S. Federal Reserve rate cut expectations, although the magnitude of the cuts shifted.
In February, 77% (versus 79% in January) of those polled looked for the Fed to cut rates in 2025, with a breakdown of 46% (39% in January) saying two cuts, 27% (27% January) saying one cut and 4% (13% last month) saying 3 cuts. Only 2% of managers expected a Fed hike in 2025 versus 1% with that view in January.
In regional equity allocation this month, the U.S. saw modest outflows, while the eurozone saw larger inflows. Other regions saw minor changes.
Allocation to U.S. equities stood at a net 17% overweight in February, compared to a net 19% overweight in January and well down from the record high allocation of a net 36% overweight seen in December.
This month, a net 12% of those polled were overweight eurozone stocks, up from a net 1% overweight in January and a large shift from the net 25% underweight seen in December.
Allocation to global emerging markets (GEM) was neutral this month, compared to a net 3% overweight in January and a net 4% overweight in December.
This month, allocation to Japanese equities slipped to a net 2% underweight from a net 1% underweight in January, while UK allocation edged down to a net 18% underweight from a net 16% underweight in January.
In February, the two biggest “tail risks” were “Trade war triggers global recession” (39% of those polled) and “Inflation causes Fed to hike” (31%)
Last month, the two biggest “tail risks” were “Inflation causes Fed to hike” (41% of those polled) and “trade war triggers global recession” (28%).
In February, the three “most crowded” trades were deemed “Long Magnificent 7” (56% of those polled), “Long U.S. dollar” (17%) and “Long Crypto” (13%).
In January, the three “most crowded” trades were: “Long Magnificent 7” (53% of those polled), “Long U.S. dollar” (27%) and “Long Crypto” (13%).
Note: the term “Magnificent Seven” was coined by Bank of America’s chief investment strategist Michael Hartnett, referring to a basket of the seven major tech stocks: Apple, Microsoft, Amazon, NVIDIA, Alphabet, Tesla and Meta.
An overall total of 205 panelists, with $482 billion in assets under management, participated in the BofA Global Research fund manager survey, taken February 07-13, 2025. “168 participants with $401bn AUM responded to the Global FMS questions and 110 participants with $199bn AUM responded to the Regional FMS questions,” BofA Global said.
Contact this reporter: vicki@macenews.com