84% in BofA Fund manager survey says US Fed will signal taper by year end

In the latest Global Fund Manager Survey (FMS) by BofA, 84 per cent of them anticipate the Federal Reserve to signal taper by year-end. Even the global growth expectations have fallen drastically, and FMS have increased the cash levels upto 4.2 per cent in August.

“Twenty-eight per cent of investors expect the Fed to signal tapering at Jackson Hole, 33 per cent of investors think September federal open market committee (FOMC) while 23 per cent of investors think Q4 2021. Note that the timing of the first-rate hike has been pushed back into 2023,” said the report.

The BofA Survey was conducted between August 6 and 12 with over 250 panelists with $749 billion in assets under management (AUM) participating. Global growth expectations have fallen drastically. August economic growth expectations are now at a net 27 per cent, lowest since Apr '20 and down from the 91 per cent peak in Mar'21.

Both growth and inflation have fallen sharply but FMS investors do not believe a recession will occur. A smaller majority of FMS investors also think inflation is transitory at 65 per cent while only 32 per cent say inflation is permanent.

The biggest risk perceived by the fund managers (before the Afghanistan debacle) was emerging markets risk (due to China) and monetary risk (due to tapering). However, the report also states that days after the close of the survey, the geopolitical situation in Afghanistan has deteriorated severely.

The FMS investors have gotten slightly more defensive in August with increase in healthcare, insurance, utilities and cash. They have also modestly trimmed their inflation exposure to materials, commodities, EM, and energy.