The Bank of America (BofA) Global Fund Manager Survey reveals that investor sentiment globally remained generally bearish in early July despite increasing bets that the world economy may achieve a “soft” economic landing and avoid a recession, while the fever over megacap technology stocks bumped the stock market higher.
A broad measure of BofA’s fund manager sentiment, which is based on cash positions, equity allocation, and economic growth expectations, shows the sentiment is still “stubbornly low” and not improving into the second half of 2023, said a team of investment strategists led by Michael Hartnett.
As found by the survey, 60% of investors expect weaker global growth in the next twelve months, with the vast majority (68%) forecasting a soft landing rather than a hard landing (21%).
Nearly half (48%) of investors surveyed expect the start of a global recession by the end of Q1 2024, while 25% expect the start at the end of this year. However, a rising number of respondents (19%) forecast no global recession in the next 18 months, up from 14% in June.
The five biggest tail risks in July were that high inflation keeps central banks hawkish (45%), a bank credit crunch and global recession (18%), worsening geopolitics (15%), an AI/tech bubble (11%), and a systemic credit event (10%).
Long Big Tech was the most crowded trade in July (59%), followed by long Japan equities (14%), short China equities (8%), long T-Bills (5%), short US dollar (5%), and short US banks (2%).