By Vicki Schmelzer
NEW YORK (MaceNews) – Global investors were less pessimistic in May as trade war uncertainty eased slightly, according to BofA Global Research’s monthly fund manager survey, released Tuesday.
Accordingly, recession and inflation concerns declined on the month, the survey noted.
A net 59% of those polled in May looked for a weaker global economy in the coming 12 months, well down from a net 82% with that view in April, which was the “most on record” (30-year history), the survey said.
“Global growth expectations have collapsed 66ppt since the high of Dec’24 (when a net 7% of FMS investors expected a stronger global economy,” BofA Global said.
At the same time, a net 30% of managers looked for higher global inflation in the next 12 months, down from a net 57% looking for higher inflation in April and compared to a net 7% looking for higher inflation in March.
About 75% of the survey was conducted before the announcement of U.S.-China trade talks in Geneva, BoA Global noted.
Cash levels fell to 4.5% in May, down from 4.8% in April and above the 4.1% seen in March. These levels compare to 3.5% in February, which was the lowest level since 2010.
Cash allocation stood at a net 26% overweight this month, versus a net 25% overweight in April and a net 10% overweight in March.
In terms of asset allocation, global investors unloaded bond holdings while dipping their toes into other asset classes.
In May, a net 13% of portfolio managers were underweight global equities, compared to a net 17% underweight in April and a net 6% overweight in March.
In contrast, a net 1% of those polled were underweight bonds this month, versus a net 17% overweight in April and compared to a net 13% underweight in March.
Allocation to real estate stood at a net 8% underweight in May, versus a net 11% underweight in April and a net 7% underweight in March.
Commodity allocation rose to a net 2% overweight from a net 8% underweight in April and compared to a net 1% underweight in March.
In terms of regional equity allocation this month, eurozone stocks were in demand while other areas saw modest tweaks.
Allocation to U.S. equities stood at a net 38% underweight in May, compared to a net 36% underweight in April and a net 23% underweight in March.
This month, a net 35% of those polled were overweight eurozone stocks, compared to a net 22% in April and nearly back at the net 39% seen in March.
Allocation to global emerging markets (GEM) fell to a net 11% overweight in May, down from a net 16% overweight in April and a net 20% overweight in March.
This month, allocation to Japanese equities stood unchanged at a net 7% underweight, while UK allocation slipped to a net 4% underweight from a net 3% underweight in April.
In terms of U.S. Federal Reserve rate cut expectations, a large majority continues to pencil in two to three cuts in 2025.
In May, 46% of investors looked for two rate cuts in 2025 (vs 34% in April), 25% said 3 cuts (unchanged), 16% said 1 cut (vs 13% in April), 5% said four cuts or more (vs 16% in April) and 4% look for no change in Fed policy (vs 9% last month).
This month, the three biggest “tail risks” were: “Trade war triggers global recession” (62% of those polled), “Inflation causes Fed to hike” (15%), and “U.S. dollar crash on international buyers strike” (14%).
Last month, the three biggest “tail risks” were: “Trade war triggers global recession (80% of those polled, “the largest concentration for a ‘tail risk’ in 15-year history”) “Inflation causes Fed to hike” (10%) and “US dollar crash on international buyers’ strike (7%).
In May, the three “most crowded” trades were deemed “Long Gold” (58% of those polled), “Long Magnificent 7” (22%) and “Long EU stocks (11%).”
In April, the three “most crowded” trades were deemed “Long Gold” (49% of those polled), “Long Magnificent 7” (24%) and “Long EU stocks” (10%).
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 208 panelists, with $522 billion in assets under management, participated in the BofA Global Research fund manager survey, taken May 2 to May 8, 2025. “174 participants with $458bn AUM responded to the Global FMS questions and 109 participants with $234bn AUM responded to the Regional FMS questions,” BofA Global said. Contact this reporter: vicki@macenews.com