According to Bank of America’s (BofA) latest global Fund Manager Survey, 77 per cent of respondents are anticipating a global recession — the highest recorded since the height of the COVID-19 pandemic in April 2020.
The survey — which gauged the sentiments of 309 panellists from 4 to 10 November — also reported that 92 per cent of investors are expecting the downturn to be characterised by ‘stagflation’ (high inflation combined with deteriorating labour market conditions and subdued market demand).
Given the “uber bearish” outlook, global fund managers are holding cash levels at 6.2 per cent, up from 6.1 per cent in September (the highest recorded since 9/11).
Profit expectations also remain low, with 77 per cent of surveyed investors expecting a deterioration — albeit an improvement on the previous month (83 per cent).
A bearish outlook on economic conditions and profitability has influenced chief investment officers (CIOs) to preference balance sheet repair (55 per cent) over capital spending (21 per cent) and buybacks (17 per cent).
When asked for their outlook on interest rates, respondents said they are expecting the US funds rate to peak at 5 per cent in the second quarter of 2023.
However, this preceded the release of the latest US Bureau of Labor Statistics, which sparked optimism of a slowdown in Fed hikes.
The bureau reported core inflation of 0.3 per cent in October, down from a 0.6 per cent rise in September.
As a result, year-on-year inflation fell below market expectations (7.9 per cent) to 7.7 per cent, down from 8.2 per cent in September — the lowest annual inflation figure since January 2022.
