Fund managers' pessimism is abating, but they are still nowhere near bullish, according to the results of Bank of America's February Global Fund Manager Survey.
Of the 299 surveyed fund managers, which oversee a total of $847 billion in assets, expectations of global growth were at a net -35%, which is still bearish; however, it represents a significant increase over the net -50% expressed by managers in January and net -69% in December. It is also the lowest level of pessimism since February 2022, when expectations of global growth were at a net -20%.
Profit expectations also continued to improve slightly, with a net 58% of investors expecting global profits to decline over the next 12 months, down from 65% in January and 74% in December.
Fund managers also continue to see stagflation as the most likely macro backdrop over the next 12 months, with a net 83% of surveyed managers believing that global inflation will be lower within the next 12 months, the same as January. The February survey report also noted that more than 75% of managers have shared that sentiment since May 2022 and says "no other macro outlook has been priced with such elevated probability."
Also reflecting slightly more eagerness to take on risk, cash levels dropped to 5.2% in February, down from 5.3% in January and 5.9% in December.
In addition, 68% of surveyed managers say the reopening of China from strict COVID-19 pandemic restrictions will have an inflationary impact.
It stands as one reason that despite growing sentiment that inflation has peaked, inflation staying high remains at the top of the list of biggest tail risks for managers at 40% (up from 34% in January, followed by worsening geopolitics at 17% (up from 13%), deep global recession (down from 20%), hawkish central banks at 15% (down from 19%), and a systemic credit event at 8% (down from 9% in January).
Managers were surveyed between Feb. 2 and Feb. 9.
