Managers Less Bearish
Fund managers are opening the new year with significantly less bearishness than December due to growing optimism regarding China and the Federal Reserve's interest rate actions, says the Bank of America's ‘January Global Fund Manager Survey.’ It found expectations of global growth were at a net -50 per cent, which is still bearish. However, it represents a significant increase over the net -69 per cent expressed by managers in December, along with the least amount of pessimism in a year. One significant driver of managers' ebbing pessimism is bullish sentiment regarding China. The net percentage of investors expecting a stronger Chinese economy rose to 91 per cent in January from 75 per cent in December. As recently as August, that number was zero. Pessimism has also abated because a majority of managers believe the Federal Reserve's federal funds rate will peak at a range of five per cent to 5.25 per cent in the second quarter of 2023. In addition, profit expectations improved slightly, with a net 65 per cent of investors expecting global profits to decline over the next 12 months, down from 77 per cent in December. However, inflation remaining high is the biggest tail risk for managers, followed by a deep global recession at 20 per cent.