Investors are seeing a slightly better outlook but weakness is still key
Investors are coming to terms with the new realities of the global economic and geopolitical landscape and are now feeling a little more optimistic.
The latest reading of the Bank of America Global Fund Manager Survey shows a three month high for sentiment between June 6-12. The 3.3 score is the best it’s been since March, before Trump’s tariffs shook the world’s businesses and markets. However, this does not reflect the evolving story in the Middle East.
Fund managers surveyed by BofA cut their cash holdings to the lowest level in three months while sharply increasing their allocations to emerging market equities, along with energy and bank stocks. They also made a modest uptick in US equities exposure but continue to hold an overall underweight position.
When asked which asset class they expect to perform best over the next five years, 54% of respondents pointed to international stocks, while only 23% chose US stocks, marking a significant shift in sentiment after more than a decade of US market dominance.
Despite lingering concerns, investors have grown notably more optimistic about the global economic outlook in recent months.
A net 36% of respondents now believe a global recession is unlikely in the coming year, softening from two months ago when a net 42% expected one. Meanwhile, the share anticipating a soft landing for the global economy over the next 12 months climbed to 66%, up from 61% in May and just 37% in April.
However, investors are not impressed by the US dollar and have scaled back their exposure to the greenback so significantly that, as of June, positioning is the most underweight it’s been since January 2005. The US Dollar Index (DXY) has dropped over 9% since the start of the year, setting it up for its worst first-half performance in more than 20 years.
