“Way” back in 2023, BofA started asking professional capital allocators about the most likely “landing” scenario for the global economy.
At the time, “no landing” was new to the macro lexicon. The associated narrative — namely that the US economy might sustain elevated inflation and high nominal growth on the way to an overheat — was gathering adherents.
Fast forward three years and that narrative is the consensus in BofA’s closely-watched monthly fund manager poll. Although July’s survey, released this week, isn’t the first time “no landing” garnered more than half the vote, 54% was a record high.
As the figure below shows, the only other time “no landing” topped 50% was in February, just before Donald Trump decided to join Israel in a coordinated effort to topple the regime in Tehran.
Note from the figure that “hard landing” managed just 2% of the vote this month, a record low. The only time “hard landing”‘s share exceeded that of “no landing” was in and around “Liberation Day.”
Thanks to a huge month-over-month drop in the net share expecting higher global CPI (a net 4% now expect inflation to be lower 12 months hence versus a net 45% expecting higher inflation in June), monetary policy expectations were markedly less hawkish.
In June, a net 34% of professionals surveyed expected higher short-term rates. By contrast, investors were more or less split in the July vintage, and 83% said the Fed won’t hike before the US mid-terms. Fewer than four in 10 fund managers expect a hike from Kevin Warsh at any time over the next year.
Small wonder, given all the above, that self-reported cash levels dropped back near a record low 3.6% (figure on the left, below) while the Overweight in US equities was the most pronounced since December of 2024 (figure on the right).
As BofA’s Michael Hartnett noted, the Overweight in US shares has only been larger two other times in half a decade.
“Investor sentiment is bullish driven by optimism on a macro ‘boom,’ AI capex [and a] dovish Fed,” Hartnett wrote, editorializing around his flagship survey.
The bank’s pseudo-famous “Bull & Bear Indicator” is nearly maxed out at 9.4, which suggests investors might consider cutting equity length, or at least high-beta exposure.
If you ask Hartnett, any “summer upside for risk assets [could] remain stymied by bull[ish] positioning.”
I am a little confused here. Are we still talking about a “landing” from COVID era stimulus? That was five-years ago. There has to be some sort of expiration date on that. We have a new administration, and now a new Fed chair. Tax cuts, deregulation, and AI capital expenditure are the new stimulus. That whole “plane” metaphor also assumes we have some agreed upon economic goal or endpoint, and I am not really sure we do. “Rates down, market up” is about all we have been given, and that really only works for the upper half of the “K”.
No one in the gub’ment cares about anyone but the top 10% of the “K”