Investors’ Optimism Reaches Highest Level Since November 2021

Investors are feeling optimistic about potential interest rate cuts, according to Bank of America’s monthly fund manager survey for May. The survey, which included global fund managers with $562 billion in assets under management, revealed that 82% of respondents expect the Federal Reserve to implement a rate cut in the second half of the year. Additionally, 78% of those surveyed believe that a recession is unlikely over the next 12 months.

Cash levels have dropped to a three-year low of 4%, while stock allocation has reached its highest point since January 2022, indicating strong investor confidence. However, expectations for global growth have decreased for the first time since November, with a net 9% of respondents anticipating a weaker economy in the next 12 months.

Despite some concerns about the global economy, the majority of fund managers remain optimistic. According to BofA, 78% of investors do not expect a recession in the near future, consistent with previous months’ expectations.

In terms of crowded trades, the survey highlighted the “long Magnificent Seven” as the most popular trade, referring to the seven most valuable U.S. companies such as Apple, Microsoft, and Amazon. “Long U.S. dollar” was identified as the second most-crowded trade, surpassing “short Chinese equities.”

Overall, investors are showing bullish sentiment, driven by expectations of interest rate cuts and a positive outlook on the economy.