ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

Fund manager confidence tumbles to crisis levels

BofAML poll of investors managing €471bn in assets found extremely bearish sentiment driven by trade concerns


David Robinson

Fund manager confidence in the global economy is at its lowest point since the 2008 financial crisis, according to the latest sentiment survey by Bank of America Merrill Lynch.

The US banking giant’s monthly poll of fund managers overseeing a collective €471bn of assets found that half of those questioned expect global growth to weaken within 12 months. The sentiment was adjudged to be on a par with levels seen in 2000/2001 and during the 2008/2009 recession.

“Investors have not been this bearish since the global financial crisis, with pessimism driven by trade war and recession concerns” said Michael Hartnett, BofAML’s chief investment strategist. “The tactical ‘pain trade’ is higher yields and higher stocks, particularly if the Fed cuts rates.”

Of those fund managers surveyed, just 9% said that they expected higher global CPI over the next year, the most bearish answer to this question since the same poll in August 2012.

When fund managers were asked to give a view on the combined inflation and growth outlook for the global economy over the coming 12 months, 74% of respondents said they were bearish on the growth outlook.

Trade war fears

Fund managers consider the potential for a global trade war to be the biggest threat to the world’s economy, according to report, with 56% of respondents in the BofAML survey identifying this theme as the most likely “tail risk” in the June 2019 report.

Monetary policy impotence was named as the largest risk by 11% of those polled with events in US politics or a slowdown in China each identified by 9% of respondents.

The findings of the BofAML fund manager survey come just a week after the World Bank Group raised its own concerns about global economic momentum.

“Current economic momentum remains weak, while heightened debt levels and subdued investment growth in developing economies are holding countries back from achieving their potential,” said World Bank president David Malpass.

“It’s urgent that countries make significant structural reforms that improve the business climate and attract investment. They also need to make debt management and transparency a high priority so that new debt adds to growth and investment.”

The World Bank predicted that growth in advanced economies was likely to slow in 2019, especially in the euro area where it predicted weaker exports and investment.