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August 16, 2022 at 02:31 PM
What You Need to Know
- Investors’ optimism about global growth bounced up from July’s record low.
- Stagflation expectations remained at record highs, and expectations of a global recession rose.
- Respondents want companies to prioritize strengthening balance sheets over increasing capital spending and buybacks.
Investors remain bearish, but no longer “apocalyptically” as their hopes rise for an end to inflation and interest rate shocks in coming quarters, according to Bank of America Global Research’s August fund manager survey, released Tuesday.
Eighty-eight percent expect lower inflation over the next 12 months. And more than half cited U.S. PCE inflation dropping below 4% as the most likely reason the Federal Reserve might “pause” or “pivot” in 2022.
Investors’ optimism about global growth bounced up from July’s record low of -79% to -67%, while their stagflation expectations, characterized by below-trend growth and above-trend inflation, remained flat at a record high of 90%.
The percentage of investors who said they expect the global economy to experience recession in the next 12 months rose to 58% from 47% last months, the highest level since May 2020, BofA said.
As recession concerns persist, investors said they want companies to prioritize strengthening balance sheets over increasing capital spending and buybacks.
BofA conducted the survey from Aug. 5 to Aug. 11 among 284 fund managers around the globe with $752 billion in assets under management.
Allocations
Forty-seven percent of respondents said they are taking lower-than-normal risk levels, down from July’s record 58%.
