How fund managers see the outlook for investing in 2024
Fund managers are beginning to feel that the situation is there to make the most of.
2023 has been characterized by war conflicts, the energy crisis, monetary tightening and lower inflation, with a slowdown in growth. Now we are starting to look at 2024, with the market already more concerned with growth and business results than inflation. That is why fund managers are beginning to feel that the situation is there to get the most out of it .
One of the surprises in 2023 has been the resilience of the United States, but the excess savings accumulated in the pandemic has been reduced by two thirds since 2021. In addition, high real interest rates are a drag on loans , which Added to this is the acceleration of the Federal Reserve’s quantitative adjustment and the net debt issuance is likely to be between 300,000 and 500,000 million dollars per quarter.
In this sense, the latest survey of fund managers carried out by Bank of America revealed that investors remain cautious about the macroeconomy, but are optimistic about interest rates , while investors’ forecasts for 2024 are a landing soft, lower rates, dollar weakness, continued rise of big tech and pharma, and avoiding leverage in China. They have changed the extreme pessimism they had last year at this same time.
“Investors expect weaker global growth (57% net), but 74% foresee a soft or no landing (21% say it will be hard); at the same time that they believe that companies will focus on improving their balance sheets (52% believe this), instead of increasing capital investments (21%) or share buybacks (18%)”, they explain from the entity. American bank.
Investor sentiment in November remains pessimistic (although no longer “extremely pessimistic”), driven by expectations for growth in the US economy. “Our measure of fund manager confidence, based on liquidity positions, stock allocation and economic growth expectations, rose to 2.6 from 1.7, the biggest monthly increase since November 2011… The indicator of bulls and bears drops from 1.7 to 1.6”, comment the experts of the North American bank.
Investors reduced liquidity from 5.3% to 4.7% (low in 2 years), and also began to overweight large bonds to the highest level since March 2009. They also position themselves in the stock market with the greatest strength since April 2012 . Something has changed in the managers’ bias with the latest data.
“The figures related to the macroeconomy have not fundamentally had to do with this change, but rather the conviction in lower inflation, rates and returns, as demonstrated by the greater overweight in bonds of the last two decades (only in March 2009 and December 2008, investors were more overweight in bonds),” experts argue.
A stable macroeconomic outlook and a much more optimistic view on rates have led fund managers to place a clear bet on stocks for the first time since April 2012. Investors increased their allocation to equities from a net underweight of 4% to a net overweight of 2% in November. An important change of direction, taking into account that throughout 2023 they have remained quite pessimistic.
New concerns
Concern about inflation and central banks is rapidly diminishing. In July of this year, 45% of respondents stated that “high inflation that would keep central banks in an aggressive position” was the main tail risk. Now only 25% see it as disturbing. Meanwhile, geopolitical risk has increased to 31% (compared to only 14% in September of this year).
Ultimately, the consensus is in favor of lowering short-term rates and inflation , with expectations for both close to the highest since the global financial crisis: only 6% expect the global CPI to increase in 2024 ( data that are at 3-month lows) and only 6% foresee higher short-term rates.
In the last twenty years, the only time that a higher percentage of investors in this survey said that fiscal policy was “too stimulating” was in November 2001. And the fiscal stimulus is what would be allowing the economic cycle to slow down. extended more than necessary in the United States.
