‘Peak Pessimism’ in Markets Is Over, but Hope Is Fragile: BofA Survey

Investors’ global growth expectations continued to move upward in June, their cash levels plunged and their risk appetites surged, according to the latest Bank of America Global Research global fund manager survey, released Tuesday.

In short, Wall Street has moved past “peak pessimism,” the survey found. However, June optimism is “fragile, neurotic, nowhere near dangerously bullish.”

A record net 78% of fund managers said the stock market was overvalued, the largest such response since 1998.

The survey was conducted June 5 to 11 among 212 panelists with $598 billion in assets under management. Just 18% expected a V-shaped recovery, compared with 64% who expected a U- or W-shaped one.

In addition, 37% said they were seeing a bull market, while 53% maintained it was a bear market rally — but down from 68% who said this in the May survey.

Forty-nine percent of fund managers in the June polling said a second wave of the coronavirus was the biggest tail risk. Fifteen percent cited permanently high unemployment, 10% the outcome of the November presidential election and 9% a trade war.

Net 61% of respondents said they expected global growth to strengthen in the next 12 months, up 23 percentage points from May and the highest level in 41 months, according to BofA.

Inflation expectations increased by 31 points to net 21% expecting a higher global Consumer Price Index in the next 12 months.

Net 67% of fund managers expected below trend growth and inflation in the global economy over that period, down 10 points from the May survey.