Global Investor Sentiment Shifts as Market Awaits Fed Decision: Bank of America Survey

September 18, 2024 01:32 PM AEST | By Team Kalkine Media

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Global investor sentiment has shown its first improvement since June, with growing optimism that the US Federal Reserve's anticipated shift towards rate cuts will facilitate a soft economic landing. This positive sentiment is highlighted in the latest Bank of America (BofA) fund manager survey.

Investor Sentiment: "Nervous Bulls"

According to BofA strategist Michael Hartnett, investors are best described as "nervous bulls." The survey reveals that 90% of investors are positioned for a steeper yield curve, while 80% anticipate a “soft landing” for the economy. Additionally, 70% of respondents believe that high-quality stocks are set to outperform lower-quality stocks.

Economic Outlook

More than half (52%) of the fund managers surveyed expect the US economy to avoid a recession over the next 18 months. Despite this optimistic outlook, a US recession remains a significant concern, identified as the biggest tail risk by 40% of respondents. Other notable risks include geopolitical conflicts, cited by 19%, and accelerating inflation, noted by 18%. Notably, fears of geopolitical conflict have decreased from 25% in the previous month’s survey.

Regional Economic Concerns

The survey also highlights growing macroeconomic concerns, particularly regarding China. Expectations for Chinese economic growth have dropped to a record low, with a net 18% of managers anticipating a weaker economy in the region.

Conversely, the outlook for the US economy has improved slightly in September. The proportion of managers expecting weaker US economic performance over the next 12 months has decreased to a net 51%, down from a net 56% in August.

Conclusion

The Bank of America survey underscores a cautious but hopeful shift in global investor sentiment. As markets await the Federal Reserve's policy decision, investors remain optimistic about a potential soft landing while navigating significant economic and geopolitical uncertainties. The evolving outlook for both US and Chinese economies will be crucial in shaping future investment strategies and market conditions.

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