BofA Fund Manager's Survey - Aug 2024

Bank of America surveys fund managers worldwide to gauge their outlook on the markets.

For August 2024 - 220 panelists with $590bn AUM participated in the August survey.

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Key: FMS - Fund Manager Survey, OW - Overweight, UW - Underweight

Here are the Key Takeaways in Charts:

47% Managers expect a weaker global economy in the next 12 month

Global growth expectations in the August survey fell a sharp 20ppt from July

Investors raised cash levels to 4.3% from 4.1%

Growth expectations & risk appetites fell in recent weeks on the back of the JPY vol shock & weak July payroll

Investor Sentiment drops to 7-month low

Fund manager sentiment based on cash levels, equity allocation, and economic growth expectations dropped to 3.7 from 5.0 last month.

55% of FMS investors believe that global monetary policy is too restrictive

Investors' belief that policymakers must ease monetary policy rapidly driving expectations for lower rates

59% expect lower bond yields

Expectations for lower bond yields jumped 14ppt MoM (the largest monthly rise since June '09 and the third largest monthly rise in 22 years).

93% of investors expect short-term rates to be lower in 12 months'

"Soft landing" economic conviction driven by expectations for lower interest rates

60% of FMS investors expect 4 or more rate cuts from the Fed

Core optimism of a “soft landing” is unchanged, but investors now expect a greater degree of Fed policy easing in the next 12 months will be required to achieve this outcome.

FMS investors rotated into bonds vs out of stocks in August

Allocation to bonds rose to net 8% OW (from net 9% UW), the highest allocation since Dec’23 and the biggest MoM increase since Nov’23.

Allocation to equities fell to net 11% OW (from net 33% OW), the lowest allocation since Jan’24 and the biggest MoM drop since Sep’22. Note in absolute terms, 31% of FMS investors said they were OW stocks (down from 51% in July).

"Long Magnificent 7" the most crowded trade

"Long Magnificent 7" the most crowded trade for the 17th consecutive month, albeit a less crowded trade in August (53%) compared with July (71%)

FMS net OW healthcare, tech & stocks vs UW REITs, consumer & materials

Investors are most OW healthcare, tech, equities, and US vs most UW REITs.

47% of investors expecting a weaker economy in the next 12 months

Sentiment on the economy collapsed 20ppt MoM to an 8-month low.

Net 29% of FMS investors expect profits to deteriorate in the next 12 months

In August, the % of FMS investors turned net negative on global profit expectations for the 1st time in 6 months, a 31ppt MoM drop (biggest monthly drop since Mar’22)

FMS investor allocation to equities is the lowest since Jan’24.

Allocation to equities fell 22ppt MoM to net 11% overweight, the biggest monthly drop since Sep’22. FMS investor allocation to equities is the lowest since Jan’24. Current allocation is 0.5 stdev below its long-term average.

FMS investors are the most overweight bonds since Dec’23.

Allocation to bonds increased 17ppt MoM to net 8% overweight, the largest monthly increase since Nov’23. FMS investors are the most overweight bonds since Dec’23. Current allocation is 2.2 stdev above its long-term average.

FMS investors have raised cash allocation in the past 2 months

Allocation to cash increased 7ppt MoM to net 6% overweight. FMS investors have raised cash allocation 12ppt MoM the past 2 months, the largest 2-month increase since Sep’22. Current allocation is 1.0 stdev below its long-term average.

August saw FMS investors increasing allocation to healthcare and staples

August saw FMS investors increasing allocation to healthcare and staples vs reducing allocation to all other sectors (but notably materials, utilities, and telecoms). FMS investors are the most (net) overweight healthcare, tech, and telecoms, and the most (net) underweight discretionary, materials, and utilities.