MILAN (Reuters) -Expectations over interest rate cuts rather than earnings optimism has made investors the "most bullish" since November 2021, Bank of America (NYSE:BAC)'s monthly fund manager survey for May showed on Tuesday.
The survey of global fund managers with $562 billion in asset under management found 82% expect the first by the rate cut by the Federal Reserve in the second half, while 78% say a recession is unlikely over the next 12 months.
The survey showed cash levels fell to a three-year low of 4% from 4.2% the previous months and stock allocation reached its highest since January 2022, a dynamic that typically reflects strong investor confidence.
However, expectations for global growth fell for the first time since November, with a net 9% expecting a weaker economy over the next 12 months, compared with 11% that expected a stronger economy in the last survey in April.
That said, most investors do not expect recession.
"On the global economy, 78% of FMS (fund manager survey) investors say a recession is 'unlikely' within the next 12 months, in line with last month’s expectations," BofA said.
"For the fourth month in a row, a greater share of
FMS investors see a global recession as 'unlikely' (78%) than 'likely' (22%)," the bank said.
In terms of crowded trades, the survey showed participants still believe "long Magnificent Seven" is the most crowded - referring to the seven most valuable U.S. companies, a group that includes Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN).
"Long U.S. dollar" was the second most-crowded trade, overtaking "short Chinese equities", the survey showed.