- Bank of America surveyed 235 fund managers, asking them a variety of questions including how likely a recession in the next year is, and whether interest rates were to rise.
- Few in the survey said interest rates would rise within the next 12 months, while the number who said a recession would hit in the next year was the highest since 2009.
- Most also said that a resolution to the trade war doesn’t look likely before the 2020 election.
- The other takeaway, BoA says: “It’s time for fiscal stimulus.”
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Global fund managers have increasingly become more worried about the state of the economy, and according to Bank of America’s global fund manager survey, the risk of recession is at its highest since 2009.
The survey, released on Tuesday, surveyed 235 fund managers who manage a combined total of $US683 billion, showed that 38% of fund managers expect a recession within the next year – the highest net percentage to say so since the depths of the financial crash in 2009.
The survey also showed that fund managers aren’t expecting great things from the economy, ahead of what’s expected to be a Federal Reserve rate cut this week. Just 21% of the fund managers expect a rise in short term rates in the next 12 months.
BoA said that this was a complete reversal of this time last year, when 87% of those surveyed said they expected higher short term rates.
Most blame the trade war for the increased risk of recession
More than a third said that the US-China trade war is the “new normal,” and 70% felt that no resolution between the two superpowers would be achieved prior to the election next year.
The survey was taken between September 12 and 16, meaning that this week’s spike in oil prices and potential geopolitical conflict has not been factored into this survey.
Bank of America highlighted that the key takeaway from the survey was that fiscal stimulus was “essential” to boosting allocations to stocks – an important point given Trump has been focusing on monetary policy to try and stimulate the economy in the form of rate cuts.
“Infrastructure spending (fiscal policy) is also the area of US economic policy where Fund Manager Survey investors think there is the most bipartisan support,” the report said, adding: “Whatever the outcome of the 2020 US Presidential election, we expect government spending to rise.”
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