In a recent global fund manager survey conducted by Bank of America (BofA), a notable shift in sentiment has emerged, reflecting increased optimism among managers regarding economic growth, albeit with rising inflation concerns. The survey, which follows the recent political developments, indicates that 22% of managers report an average cash level of 4.0%, suggesting a cautious yet optimistic approach to investment strategies [46f1ecff].
Specifically, 10% of respondents anticipate higher inflation, marking the highest level of inflation expectations since July 2021. This aligns with T. Rowe Price's outlook, which also highlights the potential for persistent inflation to influence market dynamics and central bank policies [717950e0]. Furthermore, a net 73% of managers expect lower short-term interest rates, the lowest since October 2023, indicating a belief that monetary policy may ease in response to economic conditions [46f1ecff].
The survey reveals that 23% of fund managers foresee a stronger global economy, the highest optimism recorded since August 2021. However, the probability of a 'soft landing' has decreased to 63%, while the likelihood of a 'no landing' scenario has increased to 25%, reflecting mixed sentiments about the economic trajectory [46f1ecff].
In terms of investment preferences, 35% of managers expect small-cap stocks to outperform large-cap stocks, the highest expectation since February 2021. The top asset classes favored for 2025 include U.S. equities (43%), global equities (20%), and gold (15%), indicating a strong inclination towards equities amidst inflationary pressures [46f1ecff].
This optimism is echoed in T. Rowe Price's latest market outlook, which emphasizes the potential for broadening market returns, particularly in value stocks and emerging markets, while remaining cautious about inflation and other economic risks [717950e0].
Overall, the findings from BofA's survey highlight a pragmatic optimism among fund managers, balancing expectations for growth with the realities of inflation, and providing valuable insights for investors navigating the evolving financial landscape [46f1ecff].