Iran conflict drives fund managers to slash risk and hoard cash, BofA survey shows
Fund managers pile into cash at fastest pace since Covid-19 as geopolitical tensions, inflation replace AI as top concerns, bank finds
Investor sentiment fell to a six-month low in March, while average cash allocations jumped to 4.3 per cent from 3.4 per cent a month earlier – the biggest jump since March 2020 – as expectations for global growth collapsed and inflation concerns surged amid escalating Middle East tensions, a Tuesday report based on a survey conducted by the US bank showed.
Inflation expectations surged at the same time, with 45 per cent of respondents anticipating higher global consumer prices in the coming year, up from just 9 per cent a month earlier, the survey showed. Expectations for interest rate cuts had faded sharply, with only 17 per cent now expecting lower short-term rates, the lowest level since February 2023. That compared with 46 per cent a month ago.
Fund managers also sharply downgraded their outlook for the global economy. Those expecting stronger growth over the next 12 months plunged to 7 per cent from 39 per cent in February, while 51 per cent expected a stagflationary environment of below-trend growth and above-trend inflation, versus 42 per cent a month ago.