Bank of America's August Global Fund Manager Survey: Investors Demand More Rate Cuts from Fed to Avoid Recession
The latest survey from Bank of America reveals a shift in investor sentiment, as 60% now believe that the Federal Reserve needs to implement four or more rate cuts over the next year to prevent a potential recession. This marks a significant increase in expectations for monetary easing, with investors calling for more aggressive action from the Fed.
Investor optimism about a "soft landing" has also increased to 76%, indicating confidence in the economy's ability to avoid a severe recession. However, the probability of a "hard landing" has slightly risen to 13%, reflecting ongoing uncertainty.
Global growth expectations have sharply declined, with optimism reaching its lowest level since May 2022. Concerns about China's economic outlook have played a role in this decline, contributing to the overall negative sentiment.
In terms of asset allocation, investors have shifted towards defensive options like bonds, cash, and healthcare, reducing exposure to stocks in regions like Japan and Europe, as well as the tech sector. Despite the ongoing AI boom, Chief Investment Officers are calling for a focus on improving balance sheets rather than higher capital expenditures.
The survey also highlights a continued preference for U.S. large-cap growth stocks, with the "long Magnificent 7" trade remaining popular among investors.
Overall, the survey indicates a growing belief that more aggressive action from the Federal Reserve is necessary to stabilize the economy. Investors are closely watching the Fed's moves and hoping for decisive action to avoid a potential recession.