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January BAML Survey: Fund Managers Bearish, but No Recession Yet


Dec. 4 2020, Updated 10:53 a.m. ET

BAML survey and fund managers

BAML (Bank of America Merrill Lynch) conducted a survey that polled 234 global investors with $645 billion in total assets under management between January 4 and January 10.

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Outlook gloomy, but no recession

The outlook on global growth is gloomy. A total of 60% of respondents expect a slowdown in GDP gains in the next 12 months—the worst outlook since July 2008. Investors haven’t been this bearish on the profit outlook since 2008. Net 52% of investors expect profits to deteriorate over the next 12 months compared to the net 39% of investors who expected profits to improve over the next 12 months a year ago.

Despite this pervasive gloominess, however, investors still don’t believe that a recession is on the horizon, with only 14% seeing it coming. As opposed to a recession, investors think we could see what they call “secular stagnation.”

As reported by CNBC, BAML’s chief investment strategist, Michael Hartnett, said, “Investors remain bearish, with growth and profit expectations plummeting this month.” He added, “Even so, their diagnosis is secular stagnation, not a recession, as fund managers are pricing in a dovish Fed and steeper yield curve.”

Risk-on sentiment returns

The markets (DIA) have stabilized since the sell-off last month, which may be causing investors to increase their risky bets. As December’s BAML survey indicated, investors rotated from equities (SPY) to bonds (AGG) in the biggest ever one-month rotation into the asset class. Bond allocations rose 23 percentage points to net 35% underweight. This risk sentiment somewhat reversed in January, with investors buying back into tech (QQQ) and emerging markets (EEM).


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