New research from Bank of America (BoA) suggests the European economy will avoid a recession despite a slowing in growth.
The firm’s new report, the European Fund Manager Survey, says that nearly four in five (79%) of respondents believe that there will be a soft landing for the global economy, with a net 20% expecting to see downside for European equities. That figure, said BoA, is a high so far in 2024.
BoA wrote: “65% anticipate a growth slowdown in Europe over the coming months (the highest since January), while 78% expect weakness in the US (the highest since February), both in response to the lagged impact of monetary tightening. However, investors do not expect growth to turn negative, with a new high of 79% seeing a soft landing as the most likely outcome for the global economy, while hard landing expectations linger at 11%.”
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There was growing discomfort, it found, between the views on monetary policy within Europe and the policies being practised in the US. It added that nearly two-thirds (65%) of European investors believe policies have been too restrictive, up from 59% in August—and the highest since 2008. A similar increase, of four percentage points, was also noted across the US.
It wrote: “A net 65% of European investors consider monetary policy to be too restrictive in the region, while 54% of global investors think this is the case globally, both the highest since 2008. 55% see demand destruction in response to a weakening labour market as the dominant macro theme, down from the 69% seen during last month’s market rout, but well ahead of all other readings this year.”
There was also a marked rise in confidence regarding the European economy, BoA found. It said that net 18% of European investors thought it would slow in the following year, a decrease of three percentage points on the same question last month. It found a larger fall—of five percentage points—in global investors saying that there was to be a worldwide slowdown in the same timeframe.
BoA also reported that net 20% of investors see downside for European equities over the coming months, a year-to-date high, with a plurality of 35% seeing weakening growth momentum as the most likely catalyst for a correction. A net 43% still project upside for the market over the coming twelve months, down sharply from 62% last month. Reducing equity exposure by too little and thus creating losses as equities decline is the key portfolio risk for a plurality of 28%.
To complete the survey, BoA said it spoke to 243 panellists with $666bn AUM participated in the survey. Some 206 participants with $593bn AUM responded to the global FMS questions and 138 participants with $284bn AUM responded to the regional FMS questions. It was conducted over six days at the beginning of the month.
