“The bulls are locked up” he says Bank of America (BofA). With this phrase the US entity summarizes its latest survey of investment fund managers. It is the “least optimistic since October 2020”, when the global economy was forecasting a third wave of coronavirus.
Managers’ portfolios reached their highest level of cash in a year, “As expectations turn negative for the first time since April 2020 due to inflation and China”, They explain from BofA.
As cash accumulates in wallets, the biggest concern of professional investors is inflation, according to 48 percent of respondents. Far away is China, indicated as the main problem by 28 percent of managers.
From the study it is striking that the Covid-19 it worries only 3 percent of investors.
The new scenario reaches the markets
After these figures, “The question is whether inflation is negative and whether China prefers to slow down its growth. to continue with an evolution far superior to the rest “, comments the director of the wealth advisory Luna and Sevilla Associated, Jose Maria Luna.
Luna also shares the view that the same growth will no longer be seen, but believes that it is “logical” since it means that the economy “is approaching normalization with the rise in interest rates as the best example”.
Thus, for this expert, the best scenario is “sustained growth with monetary normalization and inflation and with stagflation and great growth of China as enemies.” The truth is that Luna estimates that the Asian giant could be controlling its expansion to avoid more bottlenecks.
Living with inflation and ending bottlenecks
“If China focuses solely on achieving great growth, and leaves out key internal aspects such as the real estate crisis unleashed by Evergrande, bottlenecks will increase and it would harm the rest of the economies, which is not of interest to him ”, sums up Luna.
An analysis shared by the director of macroeconomic analysis of Rent 4 Bank, Natalia Aguirre: “The fear of stagflation is clear and the latest data on China’s GDP is an example of how the energy crisis affects, but what matters is solving the bottlenecks because, although growth slows, in the USA and Europe levels of expansion continue to be seen ”.
Therefore, for this expert it is necessary end manufacturing stoppages due to energy crisis, which will help reduce transportation and supply problems. The market is in excess demand and it seems clear that inflation has come to stay longer than expected.
A third of investors believe that a ceiling has been reached
With this scenario, the bond allocation plummeted to record lows, according to the BofA survey. “Increasing liquidity makes perfect sense for the future scenario, where fixed income is the worst going to be”, resume Luna.
Something that will be reflected in risk assets that “continue to offer attractiveness to different multiples with new entries at cheaper prices after the falls”, he acknowledges. Aguirre.
Still, investors surveyed by BofA escalated their stagflation concerns. 34 percent expect below-trend growth. In fact, they consider that the macroeconomic cycle has reached its peak.
Maximum optimism for European banks
Despite everything, investors “They remain optimistic about European equities”, they point out from Bank of America. 65 percent of the participants in the study believe that the parks of the Old Continent still have a long way to go, compared to 12 percent who believe that the hikes have come to an end.
Within the different sectors, the taste for European banking is striking, as explained by the US bank. 46 percent of respondents say they are overweight in the sector, the highest level since the survey began in 2003.
73 percent believe that banking is an attractive sector in which to position themselves for rising bond yields, while Europe’s taste for tech drops to 7 percent of respondents who are overweight in these companies from 44 percent in August.