Fund managers were the most bullish in more than two years early this month. Just in time for the stock crash.
I’m just kidding. Or not. US equities did suffer their largest two-session pullback in six months amid what one popular derivatives strategist described as a “full-blown war freakout.”
But the jury’s still out on whether that minor setback for 2024’s Raging Bull (capitalized for the Scorsese fans among you) turns into something more nefarious.
If you ask the $640 billion in AUM which responded to the global questions in this month’s installment of BofA’s closely-watched fund manager survey (titled, somewhat unfortunately, “pretty fully bully”), the outlook for global growth hasn’t been this upbeat since December of 2021.
In a milestone of sorts, the net share expecting a stronger economy is now above water, at 11%.
As the figure above shows, stocks traded the inflection early, where “early” means stocks never really caught down to growth expectations, which are “still playing catch up with equity prices,” as BofA’s Michael Hartnett put it Tuesday.
The survey was released on the same day as the IMF’s new World Economic Outlook, which painted a cautiously optimistic picture. Growth will be steady this year, at 3.2%, the Fund said, adding that median headline inflation should decline from 2.8% at the end of this year to 2.4% at year-end 2025.
“Most indicators continue to point to a soft landing,” Pierre-Olivier Gourinchas, the Fund’s director of research and “economic counsellor,” wrote, in an editorial accompanying the new report.
For their part, BofA’s fund manager panel likewise sees a soft landing, but so-called “no landing” odds are rising — “surging” even, as Hartnett put it.
The figure above gives you a sense of how ongoing overshoots for the US macro are driving subjective “no landing” probabilities higher. Those odds have risen sixfold since December.
Do note: After this week’s US retail sales overshoot, the Atlanta Fed’s GDPNow tracker for Q1 was updated to show a 2.8% run rate.
“Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth,” the IMF’s Gourinchas went on to say Tuesday. The figure below, from the BofA poll, underscores the point.
More than three quarters of survey participants now say a global recession’s unlikely over the next 12 months.
If I trafficked in the kind of worn-out “doomer” clichés that pay the bills for click-chasing web portals, I’d sarcastically wonder, “What could go wrong?”
In the same Tuesday editorial, Gourinchas wrote, of the 2020s so far, “The journey has been eventful, starting with supply-chain disruptions in the aftermath of the pandemic, an energy and food crisis triggered by Russia’s war on Ukraine, a considerable surge in inflation, followed by a globally synchronized monetary policy tightening.”
I’m not sure “eventful” is the word I’d use for humanity’s “journey” over the last four years. It’s accurate, I suppose, but it feels somehow euphemistic.
