The majority of fund managers are positioned for a soft landing or no landing scenario with the risks of trade war and recession now falling, Bank of America’s latest Global Fund Manager Survey has revealed.
Fund manager sentiment has reached its highest level since February this year, climbing to 4.5 from 4.3, with probability of a hard landing the lowest since January 2025, cash as a percentage of AUM at a historically low 3.9 per cent and equity allocations on the rise.
In terms of the macroeconomic outlook, 68 per cent of fund managers in the survey predict a soft landing, while 22 per cent expect a no landing scenario. Only 5 per cent of fund managers were positioned for a hard landing.
Allocations to global equities rose for the fourth consecutive month, to net 14 per cent overweight, the highest equity allocation since February this year.
Equity allocation still remains below the 24-year average of net 25 per cent and the recent December 2024 high of net 49 per cent overweight.
Bond allocations remain underweight, with allocations sitting at net 5 per cent underweight for August.
Cash allocations were 1 per cent underweight, down 7 percentage points from the previous month. This was the first time cash allocations became underweight since February this year and remain below the long-term average.
Real estate allocation by fund managers also remained underweight, dropping to net 21 per cent underweight this month from 10 per cent underweight in July.
Despite the increase in sentiment for August, global growth expectations pulled back slightly in August with net 41 per cent expecting the global economy to weaken.
Sentiment around the biggest tail risks was broadly spread in August.
While the risk of a trade war triggering a global recession remains the top tail risk according to 29 per cent of fund managers, this had declined from 38 per cent in July.
The risk of inflation preventing a Fed rate cut increased in August, with 27 per cent rating this as the biggest risk, up from 20 per cent the previous month.
One in five also considered a disorderly rise in bond yields to be a top risk.
The US was viewed as the region in which equities were the most overvalued by a record net 91 per cent of fund managers.
Emerging markets, on the other hand, were viewed as the region in which equities were the most undervalued, with just under half of 49 per cent considering the region to be undervalued.
