FOMO Turns Fund Managers Bullish in November: Merrill

Global fund managers added risk in November, no longer explicitly gearing their portfolios to assets that outperform in a low-growth and low-inflation environment, Bank of America Merrill Lynch reported Wednesday.

“The bulls are back,” Merrill’s chief investment strategist, Michael Hartnett, said in a statement. “Investors are experiencing FOMO — the fear of missing out — which has prompted a wave of optimism and jump in exposure to equities and cyclicals.”

Merrill’s fund manager survey was conducted Nov. 1 to 7 among 230 panelists with $700 billion in assets under management.

Investors’ concerns about a possible recession have vanished, as net 6% of managers polled said they expected a stronger global economy in 2020, up 43 percentage points from the October survey. Merrill said this was the biggest month-on-month jump on record.

Net 31% of investors said they expected higher global consumer prices in the next year, up 29 points from October.

Sixty-one percent said they expected the global two-year/10-year yield curve to steepen in coming months, up from net -30% last December and the highest level in three years.

As to which asset class will be the top performer next year, 52% of fund managers put their money on equities, while 21% said it would be commodities and 10% said cash.

Fixed income came in last even though long U.S. Treasuries was the most crowded trade from June to October this year.

Thirty-seven percent of survey respondents said they expected the U.S. dollar to depreciate in the next 12 months. Merrill noted that this was the weakest outlook on the greenback since September 2007.

Global corporate profit expectations improved by 25 points in the November poll, with net 10% of investors saying they expected profits to deteriorate over the next year.