BofA Global Fund Manager Survey: Powell Bulls & China Bears

Bank of America’s latest Global Fund Manager Survey reveals the following takeaways:

• “Investor sentiment no longer extremely bearish (17-month high in global equity allocation), but not yet bullish (cash level up to 4.9%); more dramatic shift in relative exposure: record jump in U.S., record fall in EM equities as China growth optimism slumps back to "lockdown lows"; BofA Bull & Bull Indicator up to 4.1.”
• “Convictions: "it's soft or no landing" (say 74%), "short rates to fall" (say 75%), "avoid China" (0% expect stronger China growth), "love Japan" (biggest overweight since Dec'18), "long quality" (say 77%), "U.S. tech is most crowded trade" (say 55%).”
• “On Macro: net -53% pessimistic on global growth but just 21% say hard landing & 27% expect no recession at all; more notable inflation expectations jump to highest since May'22…sticky inflation/hawkish central banks still seen as biggest "tail risk" (40%).”
• “On Policy: 6/10 say "Fed is done" (in July 9/10 said "Fed is not done"); 74% say 1st Fed cut Q224 or H224; contrast with scepticism on China policy: just 15% expect fiscal "bazooka" & investors see China real estate as #1 source for next global credit event.”
• “Contrarian views: risk asset bears vulnerable to China recovery/end of war - long HY bonds/REITs/Europe/EM/China, short U.S. dollar; risk asset bulls vulnerable to higher-for-longer U.S. rates/hard landing - long bonds/utilities, short U.S. tech/Japan.”