BofA Fund Manager Survey shows a big rotation out of commodities into tech stocks

The Bank of America’s Global Fund Manager Survey (FMS) May results are out with the latest sentiment still predominantly bearish.

The global growth expectations are at the 2023 lows with the investor sentiment further deteriorating in May “as investors raised cash balances and turned more pessimistic on growth,” according to Bank of America’s Chief Investment Strategists.

Nearly 2 out of 3 fund managers surveyed expect to see a weaker economy going forward. 63% still say the U.S. economy will have a soft landing while 27% opted for a hard landing scenario.

“Fading optimism for a strong China rebound (net 55% expect stronger Chinese economy, down 28ppt MoM) driving allocation to EM equities down (net 24% OW, down 6ppt MoM and least OW since Dec’22),” the strategists added.

On the Fed front, 61% say the hiking cycle is over with the consensus saying the Fed will start cutting in January 2024.

“Biggest tail risks are credit crunch/recession (33%), high inflation/hawkish central banks (29%); CRE seen as most likely source of credit event (49%); vast majority of investors (71%) expect US debt ceiling resolution before “X-date.””

In the meantime, the investor allocation to stocks is at a 5-month high, highlighted by the “big” rotation out of commodities into the tech (the highest in 17 months) and Eurozone. Similarly, long big tech is the most crowded trade.

Hartnett also noted that investors are most long growth vs value stocks since July 2020.