A survey from the Bank of America reveals the top current concerns of investors
The pandemic continues to create challenges for economies with infection rates unstable and vaccine roll-outs uneven.
But there are other concerns that are preying on the minds of big money managers according to a new survey from Bank of America.
It polled fund managers looking after assets of a combined US$597 billion and found that inflation and a sharp rise in borrowing costs are more likely to keep them awake at night than the coronavirus.
It’s the first time since the pandemic was starting to cause concern more than a year ago, that it has not been the main concern of large investors.
Fund managers are concerned about the Fed scaling back its support for the markets.
In the years following the financial crisis of more than a decade ago, we saw a phenomenon dubbed “taper tantrum.” The market was spooked by the Fed’s plan to curb the amount of money it had been putting into the economy. This panic that the market would collapse led to a spike in US Treasury yields. However, the scare was ultimately misguided with the market resilient to the reduction in quantitative easing.
Inflation fear
Most of the fund managers polled think that inflation will escalate in the next year.
On a positive note, most also believe that the economy will strengthen alongside rising inflation.
A sell-off of government bonds is concerning many world governments and central banks and the messaging has to set the right tone to avoid a further escalation. The Fed has hinted of tighter policy ahead.
“It’s a catch-22 for the Fed,” Jim Caron, portfolio manager at Morgan Stanley Investment Management told the FT. “They want to communicate that they are going to be patient but the more patient they are, the more people will worry about inflation.”
