Bullish investors are positioned for growth, transitory inflation and a benign Federal Reserve taper via long investments in commodities, cyclicals and financials, according to the latest global fund manager survey from Bank of America Global Research.
The survey was conducted June 4 to June 10 among 224 investors with $667 billion in assets under management.
Sixty-four percent expect a higher Consumer Price Index over the next 12 months, down 19 percentage points from the May survey. At the same time, 72% of fund managers said inflation was transitory, while just 23% said it was permanent.
Net 75% of respondents said they expected a stronger economy in the next 12 months, down 9 points month over month.
The survey found that above-trend growth and above-trend inflation remain investors' top expectation, with a record 76% of fund managers expecting this outcome over the next 12 months, up 7 points. Just 11% now expect above-trend growth and below-trend inflation in the global economy, down 8 points.
BofA said that assuming the transitory inflation consensus is correct, the peak in growth and profit expectations means the investment cycle is transitioning from early-cycle to mid-cycle, with 48% of investors thinking the economy is mid-cycle.
Sixty-eight percent of investors said they do not expect a recession until 2024 at the earliest, while 26% think a recession will occur that year and 25% say it will happen in 2023.
Sixty-three percent of survey respondents said they expect the Fed to signal taper this summer, either at its annual Jackson Hole symposium in late August or at the September Federal Open Market Committee meeting.
