Recession Fears Mount: Investors Call for More Aggressive Fed Rate Cuts
Investor sentiment has changed, according to Bank of America’s August Global Fund Manager Survey, with worries about the Federal Reserve’s ability to avert a possible recession intensifying.
As per the survey, sixty percent of investors now think that in order to prevent a downturn in the economy, the Fed should lower interest rates four times or more in the upcoming year.
In contrast to prior months, this indicates a discernible rise in expectations for monetary easing. “Investors now think Fed needs to cut harder to guarantee no recession,” according to BofA.
The bank also notes that investor confidence in a “soft landing”—a recovery from a deep recession—has increased to 76% from 68% in the preceding month.
But in addition, the likelihood of a “hard landing” has gone up a little, from 11% to 13%, indicating ongoing uncertainty.
According to BofA, prospects for global growth have drastically decreased, with optimism falling from a net -27% to a net -47%, the lowest level since May 2022.
It’s been reported that worries about China’s economic prospects, which have dropped to their lowest level in more than a year, have contributed to this dip.
According to the bank, only 24% of Chief Investment Officers (CIOs) are recommending greater capital expenditures, which is the lowest percentage since November 2023, despite the continuous AI boom. Rather, 40% of CIOs prefer that CEOs concentrate on strengthening balance sheets.
BofA’s analysis of asset allocation shows that investors have shifted defensively towards bonds, cash, and healthcare, while decreasing their exposure to stocks, especially those in Europe, Japan, and the technology sector.
The BofA study also shows that investors are still drawn to large-cap growth equities in the United States, and that the most popular trade is still the “long Magnificent 7” strategy, albeit with a little less volume than previously.
Overall, the study confirms the growing consensus that the Fed must intervene more aggressively in order to ensure economic stability.
Website: Financial StreetInfo.com
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