Listen to this Article Now
Per the September edition of BoFA’s monthly fund manager survey, only about a tenth of respondents predict a stronger global economy in the next months, the lowest ratio since last April’s initial COVID-19 panic. Economic growth estimates have dropped to a net 13 percent, the lowest level since April 2020 and a significant drop from a peak of 91 percent in March of this year. According to the popular monthly survey, the expansion of the Delta variety was the cause of the pessimism.
Despite mounting skepticism about the macroeconomic outlook, asset market positioning is still overwhelmingly favorable. Equity market protection, which is meant to protect portfolios against a severe decline in asset values, was at its lowest since January 2008.
With $840 billion in assets under management, nearly half of BofA’s clients have said they have eliminated protection against a steep drop in share prices over the next three months, the lowest figure since January 2018 Furthermore, broader equity market stance remains firmly optimistic, with net global equity allocations at 50 percent, much above the 20-year average of 29 percent, according to the study.
“A rare disconnect is growing between asset prices and fundamentals,” a team of strategists led by Michael Hartnett wrote in a note to clients. The overall market view remains cautious, with survey respondents expecting central banks to continue dovish.
Eighty-four percent of investors now expect the Federal Reserve of the United States to begin tapering its stimulus measures by the end of the year, however the first U.S. rate hike has been put back to February 2023 from November 2022 previously. Furthermore, 82% of respondents expect China to soften policy, up from 44% in July.
Global liquidity circumstances were widely regarded as the finest they had been since just before the global financial crisis rocked global markets in July 2007. Almost 60% of survey respondents believed monetary policy was “too speculative,” the largest proportion since May 2011.