Here’s Global Fund Managers’ Top Concern in May

BofAML Fund Manager Survey

The BofA Merrill Lynch global fund manager survey is a monthly survey conducted by Bank of America Merrill Lynch (or BofAML) that collects responses from approximately 200 institutional, mutual, and hedge fund managers around the world. The survey collects the views of global managers on equity markets (SPY), the most crowded trades for that month, and what managers consider to be risks to the global markets (VOO). The latest survey involved responses from 223 money managers who collectively manage assets worth $643 billion. The survey was conducted between May 4 and May 10.

Here’s Global Fund Managers’ Top Concern in May

Risks as seen by global fund managers

Global trade war risk was no longer the top concern of global fund managers in the May report, as this top spot is now occupied by the threat of a policy mistake from the US Federal Reserve or the European Central Bank (or ECB). 30% of the respondents considered central bank policy mistakes to be a major threat to markets, 25% saw trade war concerns as a tail risk, and a small proportion of the respondents (12%) saw geopolitical issues leading to higher crude oil (USO) prices as a tail risk event for the financial markets.

Why are global fund managers worried about central banks?

Fund managers are worried that the US Federal Reserve will overtighten policy, which could lead to US dollar (UUP) depreciation and eventually force yield curve (BND) inversion, leading to an economic slowdown. The ECB, on the other hand, could tighten sooner than required, assuming that the first quarter weakness was transitory, which could derail the economic progress in the region. Tightening policy too quickly could increase the borrowing cost to businesses and lead to lower profits for companies, and this is the primary reason why fund managers are worried about policy mistakes from central bankers. In the next part of this series, we’ll discuss the views of global fund managers on equity.