According to the latest Bank of America (BofA) survey, most institutional investors believe that the biggest tail risk in the financial markets is no longer the new pneumonia Epidemic, but “higher-than-expected Inflation“. Analysts also expect funds to continue to rotate from growth stocks to value stocks, and favor assets such as commodities and real estate.
Since the outbreak of Newcastle pneumonia in February last year, in the Bank of America’s global fund manager survey, the Newcastle epidemic has been ranked as the number one tail risk for managers, but the survey conducted from 5 to 11 this month shows that the most respondents now believe that the biggest risk to the market is “higher-than-expected inflation”, accounting for 37%.
The second biggest risk is the “bond market panic”, followed by the launch of the new vaccine crown and Wall Street bubble.
The survey also shows that the next 12 months is expected to inflation will be higher fund managers up to 93%, 91% of investors expect the economy will turn stronger, the global corporate profits are expected to improve next year, respondents reached 89%, a record high, and the Federal Reserve Board (Fed) is expected to start raising interest rates in February 2023.
The survey, which surveyed a total of $630 billion in assets and 220 managers, also showed that 48% of respondents said the global economy will show a “V” shape recovery, much higher than the 10% in May last year. Bank of America chief investment strategist Hartnett said the survey results show that investor sentiment is “clearly bearish”.
Hartnett said that most respondents believe that the U.S. bond yield rate to 1.5% does not cause the stock market to fall into the correction, but from 1.5% to 2% of this period is the key, 43% of respondents believe that the U.S. bond yield rate to 2%, will lead to the stock market back to 10%. 52% of respondents also believe that the performance of value stocks will be better than growth stocks this year.
Goldman Sachs recommends buying stocks with lower-than-average prices, increasing profits per share, and stocks that often follow the rise in U.S. bond interest rates.
In the face of a new era of inflation, Goldman Sachs portfolio strategy and asset allocation department managing director Mueller-Glisman bullish on commodities, especially oil; JP Morgan Asset Management strategist Maharaji prefers alternative assets such as infrastructure, as well as real estate and the U.S. dollar; Algebris hedge fund portfolio manager Garrow favors value stocks convertible bonds, and commodities.
If inflation rises, U.S. anti-inflation bonds (TIPS) can provide reasonable protection, and commodities and real estate-related assets are also expected to benefit from inflation, according to Pinho’s sovereign credit analyst Mai.
Some experts also believe that it is premature to have doubts about a significant rise in inflation. Brockland, portfolio manager of Hoboken Investment Management Group, said, “Inflation in the euro zone, Japan and other places is still far below the central bank’s target, and the risk of inflation in the United States is higher, but it is not enough to hit the stock market hard.”
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