The outlook for the global economic climate is the most positive it has been in the past two years. Most fund managers believe central banks can bring inflation to the target rate without triggering recession.
Bank of America’s latest survey of global fund managers found that 62% of respondents anticipated a “soft landing”, with the global economic avoiding recession, and a sharp increase in unemployment when inflation returns to banks’ 2 percent target.
Fund managers are less concerned about a “hard landing” scenario, which is a slowdown in growth or a contraction of the economy as a result. Only 11 percent of them expect one this year, down from 30 percent last year.
The results show that the global economy has fared better than analysts had expected, when Central Banks were in the midst of tightening policies.
The US economy has grown at an exceptional rate, growing by around 3% last year despite Federal Reserve interest rates being raised to the highest levels in over 20 years. The US economy grew at a faster rate than other G7 countries.
Bank of America reported that market participants increased their exposure to riskier European assets and American assets as a result of outperforming growth. Wall Street’s leading share indices, including the S&P 500 and the technology-heavy Nasdaq, have reached record highs in this year. This is due to strong demand for tech stocks.
Investors are also planning to increase their exposure to UK shares, which could provide a boost to FTSE 100 – one of the only premier indices that has fallen this year. The respondents said they view the UK and French stock markets as being the most attractive in Europe for the next twelve months. Italy’s market was the least attractive, and Spain was second to last.
Fund managers are most concerned about commercial real estate, which is a sector that 40 percent of them deem to be the greatest risk for the credit system. This fear has surpassed the potential ripple effects of stress on the Chinese residential real estate market.
Bank of America’s study of 226 respondents, who had $572 billion in assets under management, found that the most common financial market trade was to buy shares of the “magnificent seven” Wall Street technology stocks. This group includes Nvidia Meta Platforms Apple Amazon Microsoft Alphabet (which owns Google) and Tesla. All of these companies are expected to benefit from the increased integration of artificial intelligent into consumer products and production.