Vantage Point: Economic Outlook  

Slowdown in fund managers’ recession fears

Slowdown in fund managers’ recession fears

Fears over a weakening economy eased this month as global markets marched up in the first few weeks of August.

Some 67 per cent of investors think the global economy is set to weaken over the coming year, according to Bank of America’s fund managers survey.

This is down from 79 per cent last month.

However, sentiment among fund managers is still gloomy, with three quarters (75 per cent) expecting a recession to hit Europe in the next two months, and 46 per cent believing that high energy prices will cause European growth momentum to slump.

These flickers of optimism have been reflected in markets, with the FTSE 100 rising 4 per cent in the past month, and the Dax nudging up 5 per cent.

Global growth pessimism easing from all-time high

Over half (55 per cent) of respondents said they expect the equity rally to continue, with half of these projecting a rise of 5 per cent or more for European equities over the next year.

These managers are still positioning their portfolios as “long stagflation”, so exposed to commodities, cash and defensive plays, and “short Goldilocks”, so limited exposure to consumer and European stocks.

August saw a big rotation away from staples, utilities and UK stocks, BoA said, with fund managers preferring US, tech and consumer stocks.

For the first time since August 2020, the surveyed managers said they think growth stocks will outperform their value counterparts in the next 12 months.

Some 284 fund managers with $836bn in AUM were queried between August 5 and 11.