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Published Feb 13, 2024 06:39AM ET
© Reuters
On Tuesday, the latest European Fund Manager Survey, summarized by BofA, revealed a significant shift in sentiment among fund managers regarding the US economy’s robustness amid monetary tightening. According to the survey, 62% of respondents now believe the US economy will remain resilient, a considerable increase from the 28% reported last month. Meanwhile, those anticipating an immediate US slowdown due to monetary tightening have decreased from 61% to 32%.
The survey also highlighted that growth pessimism in Europe is still notable, with 62% of respondents expecting a weaker European economy as a result of monetary tightening. However, this represents a decline from the 83% who held this view last month. Notably, a net 37% of participants view global fiscal policy as overly supportive, which is close to a record high. In contrast, a mere net 3% consider Europe’s fiscal stance to be too restrictive.
The outlook for the global economy among fund managers appears cautiously optimistic, with 65% predicting a soft landing as the most probable scenario. The proportion of those in the ‘no-landing’ camp, indicating no significant economic downturn or upturn, has risen to 19% from 7% last month.
In terms of European equities, 78% of survey participants see potential for upside over the next twelve months, marking the highest level of optimism in two years. Despite this, after a strong rally since October, 51% foresee near-term downside for the market, down from 56% the previous month. The expectation for lower European Earnings Per Share (EPS) has also decreased markedly, with only 54% anticipating a drop due to slowing growth and subsiding inflation, compared to 75% last month.
Finally, the survey indicates a growing optimism for European cyclicals, with 46% of investors expecting further upside relative to defensives, a sharp increase from 22% in the prior month. However, a plurality of 35% still expects further downside for European value stocks compared to growth stocks, influenced by dovish central banks, though this is down from 50% last month. Insurance remains the most favored sector for overweights in Europe, followed by technology and healthcare, despite a general optimism for cyclicals.
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