Cash Levels: Fund managers’ average cash balance has risen to 6.1% in September – the highest since October 2001 after the 9/11 shock, and well above the long-term average of 4.8% as recession concerns rise, the survey said.
Risk Aversion: The BofA survey said, “Record low share of FMS investors (net -60%) taking higher risk than normal.” Investor risk appetite is on a par with the low of March 2020 when Covid broke out.
US Interest Rates: In the fund manager survey, 38% now see the Fed hiking rates to 4%-4.25% as against 3.5-3.75% expected in August. Investors think inflation, as measured by the PCE deflator, needs to slow to below 4% (currently 6.3%) for the Fed to stop hiking or even start contemplating cuts.
Recession: The share of fund managers saying recession is likely has increased further in September to 68%, the highest since May ’20, the survey said.
Inflation: 79% of the global fund manager survey participants see slower inflation over the next 12 months than today, hinting that inflation may have peaked last month.
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