Since its inception and unstoppable spread of Coronavirus across the globe, the investors feared it as a “tail risk”, but not anymore! The latest survey of global Fund Managers by Bank of America (BofA) shows that the global pandemic Covid-19 is not the major cause of worry for the fund managers, instead the inflation and the “Taper Tantrum”.
In the survey for March by Bank of America (BofA), Fund managers view higher-than-expected inflation (37% of the total investors) and a tantrum (35% of the total investors) in the bond market can pose a danger to the market, making the market less attractive and worrisome to investors.
220 investors with $630 billion in assets under management were polled between March 5 and 11, showing the mean cash balance increasing to 4.0% from 3.8%, hedge funds’ net exposure to equities ticks highest since June 2020, and hedge fund allocation to commodities is an all-time high.
The survey says, 48% of the fund managers expect the economy of the world, to deliver a V-shaped recovery, as compared to only 10% in the May 2020 survey.
Michael Hartnett, Chief Investment Strategist at BofA, said that the survey outcomes were “unambiguously bullish”.
“91% of the total investors hope for a stronger economy, while 89% of investors expect global profits to see improvement in the next 12 months, the highest ever since the survey began.
Responding to the Survey results, Jeroen Blokland, portfolio manager with asset management company Robeco, in his latest blog writes, “I think it’s too early to be worried about inflation, though. First, in many areas such as the Eurozone and Japan, inflation remains far from central bank targets. Overshooting risks are low. In the US, inflation risks are higher, but not enough yet to derail equity markets. For bonds, however, things look less favorable, with yields likely to rise further in the coming months. Hence, stay short duration.”
Expressing the same opinion, an excerpt published in The Mint puts what Guggenheim Global CIO Scott Minerd had to say about the survey.
He says, “Market participants have been focused on the prospects for a sharp rise in U.S. inflation amid massive fiscal and monetary easing and a Covid-19 vaccination program that continues to gather pace. Our view is that inflation will generally remain subdued in coming years, allowing the Fed to point to cumulative shortfalls from its two per cent goal to support delaying the start of policy tightening. Incoming data support our view that underlying inflation is slowing, not accelerating.”