Bofa Fund Manager Survey Highlights Key Market Insights

The Bank of America fund manager survey is a highly anticipated event that provides valuable insights into the market. The survey polled 234 fund managers who manage $630 billion in assets.

According to the survey, 55% of fund managers are overweight in US stocks, indicating a strong confidence in the US market. This is a significant increase from the previous quarter.

Fund managers are also cautious about global economic growth, with 56% expecting a recession in the next 12 months. This pessimism is reflected in their asset allocation, with 42% of managers reducing their exposure to global equities.

The survey highlights the importance of being prepared for market volatility, with 76% of fund managers expecting higher volatility in the next 12 months.

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Fund managers are feeling relatively optimistic about a soft landing scenario, with 76% holding this view.

Cash levels rose to 4.3% from 4.1% but are still at the low end of historical norms.

Monetary policy is seen as too restrictive by 55% of managers, the highest since October 2008.

Expectations for lower bond yields are above 50%, which hasn't been seen since December 2023.

The last time bond yields were this high, they rose to 4.8% from 3.94% in 30-year yields.

A net 8% overweight allocation to bonds is still low but a rapid change from 9% net underweight a month ago.

Here's a breakdown of the most-crowded trades:

Fund managers are still historically long equities, despite the recent drop in stocks.

They're also long in healthcare, tech, equities, and the US, while shorts are crowded in REITs, discretionary, materials, and Japan.

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According to the BofA Fund Manager Survey, investors are increasingly concerned about inflation, with 64% of respondents citing it as a major risk to their portfolios.

Investors are also shifting their focus towards value stocks, with 40% of respondents saying they're overweight in value stocks, the highest level since 2007.

The survey found that investors are expecting a moderate economic expansion, with 85% of respondents predicting GDP growth of 2-3%.

Investors are also becoming more cautious, with 60% of respondents saying they're underweight in equities, the highest level since 2008.

A significant 85% of respondents expect interest rates to rise over the next 12 months, with 45% expecting a 25-50 basis point hike.

Investors are also becoming more defensive, with 40% of respondents saying they're overweight in cash and cash equivalents.

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Fund managers are taking a record-high risk, with 25% of them taking "higher-than-normal" risk in February.

This level of risk-taking is a significant shift from previous years, and it's essential to understand the implications of such a bold move.

An allocation of 61% to global equities is the second-highest on record, and it's the highest since February 2011.

This extremely bullish stance suggests that many fund managers are confident in the market's prospects, but it also increases the potential for losses if the market turns.

Fund managers have never been more optimistic about global equities, with an allocation of over 50% indicating a significant shift in sentiment.

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Fund managers are predicting a steeper yield curve, with 82% expecting this, down from 83% in January. This level is actually higher than during significant market events like the 2008 Lehman Bankruptcy, 2013 fed taper tantrum, and 2016 U.S. Presidential elections.

A significant number of fund managers also expect higher inflation in the next 12 months, with 86% anticipating this, down from 92% in January.

Some fund managers are optimistic about small caps, with a record 31% expecting them to outperform large caps in the next 12 months.

Gold is seen as undervalued by 8% of participants, which is the first time this has happened since June 2020. Interestingly, the last instance of this saw gold rally 22% in the next two months.

Here are the most crowded trades, according to the survey: