–Growth Expectations Jump, Inflation Concerns Sharply Rise
By Vicki Schmelzer
NEW YORK (MaceNews) – U.S. election results prompted seismic shifts in global growth and inflation expectations, according to BofA Global Research’s monthly fund manager survey, released Wednesday.
In terms of post-election views, global growth expectations jumped from a net 10% looking for weaker in October to a net 23% looking for stronger growth in November. In September, a net 42% looked for weaker growth in the coming 12 months.
Specifically, U.S. growth expectation flipped from a net 22% looking for weaker growth to a net 28% looking for stronger growth in the next year.
Post election, a net 10% looked for higher inflation in the coming 12 months. This compared to a net 44% looking for lower CPI in the next year in October and a net 67% looking for lower CPI in September.
This is the first time since August 2021 that global investors have forecasted higher inflation in the coming year, the survey said.
For the full survey, taken November 1-7, a net 4% expected a weaker economy in the next 12 months and a net 16% looked for weaker inflation in the coming year.
Some of those polled this month responded to the survey ahead of the November 5 election and some responded afterwards.
In terms of asset allocation, global investors added to equity and bond holdings in November, while lightening up on real estate and commodities.
In November, a net 34% of portfolio managers were overweight global equities, compared to a net 31% overweight in October and a net 11% overweight in September.
A net 10% of those polled this month were underweight bonds, compared to a net 15% underweight in October and a net 11% overweight in September.
Allocation to real estate held at a net 12% underweight in November, compared to a net 3% underweight in October and a net 17% underweight in September.
This month, commodity holdings stood at a net 9% underweight, compared to a net 1% overweight in October and a net 11% underweight in September.
Average cash balances rose to 4.3% in November, compared to 3.9% in October and 4.2% in September.
“For the 22% of global respondents who competed the survey after the results of the US election were known, average cash level was 4.0%,” the survey noted.
Allocation to cash held at a net 4% overweight in November, compared to a net a net 4% underweight in October and a net 11% overweight in September.
In equity allocation this month, the U.S. and emerging markets saw inflows, while other regions saw outflows or were little changed.
Allocation to U.S. equities rose to a net 13% overweight in November, compared to a net 10% overweight in October and a net 8% overweight in September.
“Post-election, US equity allocation jumped to a net 29% overweight,” BofA Global said.
In November, a net 3% of portfolio managers were underweight eurozone stocks unchanged to October and compared to a net 8% overweight in September.
Allocation to global emerging markets (GEM) rose to a net 27% overweight this month, compared to a net 21% overweight in October and a net 1% overweight in September.
This month, allocation to Japanese equities fell to a net 13% underweight from a net 2% underweight in October, while UK allocation fell to a net 13% underweight from a net 6% underweight last month.
In November, the top two biggest “tail risks” feared by portfolio managers were “Global Inflation accelerates” (32% of those polled) and “Geopolitical Conflict” (21%).
In October, the biggest “tail risks” feared by portfolio managers were: “Geopolitical conflict” (33% of those polled), “Global inflation accelerates” (26%), “US Recession” (19%), “US election ‘sweep’” (14%) and “Systemic credit event” (5%).
In November, the top three “most crowded” trades were deemed: “Long Magnificent 7 stocks” (50% of those polled), “Long Gold” (28%) and Long US dollar” (7%).
In October, the top three “most crowded” trades were “Long Magnificent 7 stocks” (43% of those polled), “Long Gold” (17%) and “Long Chinese equities” (14%).
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.
In terms of post-election results, when asked about the best performing asset classes for 2025, a net 43% of fund managers said U.S. stocks, a net 20% said global equities and a net 15% said gold.
Bullish developments for 2025 include “China growth accelerates’ (43% of those polled), “US tax cuts” (21%) and “AI productivity gains” (18%), while potential bearish developments were a “Disorderly rise in bond yields on debt fears” (42% of those polled) and “global trade war” (30%).
An overall total of 213 panelists, with $565 billion in assets under management, participated in the BofA Global Research fund manager survey, taken November 1 to November 7, 2024. “179 participants with $503bn AUM responded to the Global FMS questions and 120 participants with $248bn AUM responded to the Regional FMS questions,” BofA Global said.
Contact this reporter: vicki@macenews.com