Expectations of global economy weakening further hit 30-year high, reveals BofA Global Fund Manager Survey

“Net 82% of respondents say global economy to weaken (30-year high), 42% say recession likely, inflation expectations highest since Jun '21… 41% of investors predict 3 or more Fed cuts on sharp deterioration of ‘liquidity conditions’,” stated the survey report for the month of April.

The latest edition of the Bank of America Global Fund Manager Survey has revealed that expectations of the global economy weakening further among some of the biggest global fund managers have touched a 30-year high with recession expectations reaching the fourth highest level in the last 20 years.

“Net 82% of respondents say global economy to weaken (30-year high), 42% say recession likely, inflation expectations highest since Jun '21… 41% of investors predict 3 or more Fed cuts on sharp deterioration of ‘liquidity conditions’,” stated the survey report for the month of April.

More importantly, the latest Fund Manager Survey (FMS) found that a record number of global investors are intending to cut US stocks with fund managers most bearish on macros.

The survey findings assume significance, as the period of the survey was April 4-10 – post the “Liberation Day” tariff announcements by US President Donald Trump – and nearly 200 fund managers with cumulative assets under management (AUM) of $444 billion participated in the survey.

Meanwhile, in terms of allocations, the survey findings revealed a record increase in bond allocation with global equity allocation hitting the lowest level since Jul 2023. Further, US stock allocation saw the largest two-month drop ever with investors most underweight on cyclicals vs defensives since May 2020.

The current level of sentiment is the fifth lowest on record (behind 2001, 2009, 2019 and 2022), stated the report. Meanwhile, the FMS cash level rose to 4.8%, up 125 basis points (bps) since February 25, which is the largest two-month increase since Apr 2020.

Incidentally, FMS cash levels averaged 6.2% in the nine prior highs since 1999 (May 2000, February 2001, October 2001, March 2003, December 2008, June 2012, October 2016, April 2020, and October 2022).

In terms of the most likely outcome for the global economy in the next 12 months, “hard landing” expectations jumped in April to 49% (up from 11% in March). Meanwhile, expectations for “soft landing” fell to 37% (from 64%) and “no landing” to 3% (from 19%), as per the survey findings.

Further, net 42% of investors expect a global recession, which is the most since June 2023 and the fourth highest level in the past 20 years. It is also a big flip from last month’s net 52% saying a recession was unlikely.

On a different note, investors have turned negative on US profit outlook with net 28% saying that the outlook for US profits is unfavourable -- the most since November 2007. Further, net 61% expect the US dollar to depreciate over the next 12 months -- the most since May 2006.