Recession among fund managers rises to the highest level in a decade
The risk of a global recession is at its highest since August 2009, according to a survey by fund managers, as slowing growth, trade and political uncertainty are taking a toll on investor sentiment.
About 38% of investors polled in the Bank of America Merrill Lynch Fund Manager Survey for September, released Tuesday, expect a recession over the next year. This figure was 34% in the August survey, the highest response since October 2011.
Investors surveyed between September 6 and September 12 showed no sign of a conversion to "value" properties, which are still overweight on investments that undergo a backdrop of low growth and low interest rates. Only 7% of those surveyed expected value shares to outperform growth over the next 1[ads1]2 months.
Risk and Opportunities
The study, conducted over 235 panelists with a total management capital of $ 683 billion, revealed that investors see German fiscal stimulus as having the most bullish potential for risk allocations over the next six months, followed of a 50 basis point cut from the US Federal Reserve and Chinese infrastructure spending.
On the US front, investors have identified infrastructure spending as the area of economic policy with the greatest bipartisan support.
The US-China trade war continues to be at the top of the list of investors' risks, with 40% citing trade as a major concern. When asked about a resolution on the trade war, 38% of those surveyed said that today's distance between the world's two largest economies is the "new normal", compared to just 30% who expect a resolution before the US presidential election in 2020. [19659002
Allocation
Bond allocation fell 14 percentage points to a net 36% underweight, after the August survey hit the highest since September 2011. Long US government bonds remain the most crowded trading area for the fourth straight month, the study said.
At the regional level, US stock allocations jumped 15 percentage points to a net 17% overweight position, the largest monthly increase since June 2018, making the United States the most preferred region among funders agers.
"We remain contrarily bullish as investors this month have only shown a modest improvement in risk appetite," said Bank of America Merrill Lynch Chief Investment Strategist Michael Hartnett.
Hartnett concluded that fiscal stimulus would offer the most powerful boost to investor optimism, cementing a "bond-to-share, growth-to-value" rotation.
