BofA-ML April survey: Fund managers add equity allocations as economic view turns less bearish

Sculpture by Jimmie Durham, titled ‘Still Life with Spirit and Xitle,’ made of car, volcanic stone and acrylic paint at the Hirshorn museum in Washington, DC. Photo taken July 2018.Sculpture by Jimmie Durham, titled ‘Still Life with Spirit and Xitle,’ made of car, volcanic stone and acrylic paint at the Hirshorn museum in Washington, DC.

Global fund managers have turned slightly less bearish in their economic outlook in April, spurring additions to their equity allocations, Bank of America-Merrill Lynch’s fund manager survey for April found.

Growth expectations have continued to rebound in April, with a net 5 percent of the fund managers surveyed expecting global growth would weaken over the next 12 months, a 20 percentage point rebound from March, the survey published Wednesday found.

January’s sentiment low of 60 percent of fund managers expecting weaker global growth was similar to levels during the 2000-01 and 2008-09 recessions, BofA-ML said.

But fund managers remained concerned, with 66 percent bearish on both the growth and inflation outlook for the global economy over the next 12 months, the highest since October 2016, the survey found.

On the corporate front, the survey found fund managers were somewhat less bearish, with a net 16 percent expecting global profits will deteriorate over the next 12 months, up 36 percentage points from January’s lows, which was the worst outlook since December 2008, during the Global Financial Crisis.

Some signs of better economic data spurred further allocations to global equities, with a net 17 percent of fund managers surveyed saying they were overweight, up 14 percentage points from March’s level, which was the lowest since September 2016, in the lead up to the last U.S. presidential election, BofA-ML said.

Bond allocations rose 3 percentage points on-month to a net 34 percent underweight, marking a seven-year high amid central banks’ continued easy policy, the survey found.

Allocations to cash dropped 14 percentage points on-month to a net 26 percent overweight in April, marking a 14-month low, the survey found.

U.S. equities saw allocations rise by 4 percentage points on-month to a net 4 percent overweight, after falling into negative territory in February for the first time in nine months, BofA-ML said.

Eurozone stocks were called the “most crowded” trade in the fund manager survey for a second straight month, with allocations rising to a net neutral, up 8 percentage points on-month, the survey found.

The love for Europe didn’t extend to the U.K., which remained fund managers’ least-favored region, BofA-ML said, adding that allocations were flat on-month at a net 28 percent underweight amid the announcement of a Brexit delay. On the upside, that was an improvement in sentiment from March’s net 41 percent underweight, but few were invested in the region, it said.

Emerging markets equities remained a consensus overweight among fund managers surveyed, but allocations to the segment fell 6 percentage points on-month to a net 34 percent overweight, BofA-ML said.

BofA-ML said the global fund manager survey, which ran from 5-11 April, had 187 participants with US$47 billion in assets under management.

 

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