On Tuesday, July 18th, Bank of America released the results of its fund manager survey for the month.
The survey shows that the majority of respondents believe that the global economy will enter a mild recession in the fourth quarter of this year or the first quarter of next year. In addition, 19% of respondents believe that the global economy will not enter a recession before 2025.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/01dede36-a8d6-4997-9059-c9eaef92fea3.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/01dede36-a8d6-4997-9059-c9eaef92fea3.png"/>
68% of respondents believe that the global economy will achieve a &#34;soft landing,&#34; while 21% believe that the global economy will have to undergo a &#34;hard landing.&#34;
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f768eae2-3210-420e-a037-aa5cf8499e93.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f768eae2-3210-420e-a037-aa5cf8499e93.png"/>
The survey was conducted from July 6th to 13th, with 262 respondents and assets under management totaling $652 billion.
Although fund managers surveyed generally remain pessimistic about the global economy, there has been a clear shift in consensus regarding the profitability of global listed companies. Most respondents expect the second quarter to be the trough of corporate earnings. Michael Hartnett, an analyst at Bank of America, said that &#34;respondents' expectations for corporate earnings are the least pessimistic since February 2022,&#34; and he expects global earnings per share to increase slightly by 0.5% over the next 12 months. In other words, fund managers expect the decline in corporate profits to have ended.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/86088ea5-c915-442c-b3c2-4bbdfd68e460.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/86088ea5-c915-442c-b3c2-4bbdfd68e460.png"/>
In relation to this, fund managers are more optimistic about the stock market. Although the surveyed fund managers are still reducing their holdings of global stocks (net reduction of 24%), this is the lowest reduction level since the beginning of the year.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e0d276a5-bc80-4975-baef-1331514c245b.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e0d276a5-bc80-4975-baef-1331514c245b.png"/>
When asked about the impact of the artificial intelligence wave on the market, 42% of respondents believe that AI will bring higher profits to companies in the next two years, 1% believe it will bring more job opportunities, 16% believe it will have both effects, and 29% believe that AI will have no positive impact on job opportunities and corporate profits.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/06dd387b-4e58-4b85-9c57-bd1604d21589.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/06dd387b-4e58-4b85-9c57-bd1604d21589.png"/>
However, despite the increased optimism in the stock market, fund managers' sentiment towards commodities has been cooling month by month. July saw the largest monthly reduction in commodities holdings since May 2020.
At the same time, the cash levels held by fund managers increased from 5.1% in June to 5.3% in July.
In this survey, fund managers also generally believe that the current &#34;loose fiscal and tight monetary&#34; policy in the United States is the most extreme since 2008.
This is also why 45% of fund managers believe that inflation/policy errors are the biggest &#34;tail risk,&#34; followed by credit tightening, which 18% of fund managers believe.
40% of fund managers believe that defaults in commercial real estate are still the most likely catalyst for a global &#34;credit crisis,&#34; although the proportion of fund managers holding this view has declined from the peak in May.
Among various trades, going long on large-cap tech stocks is the most crowded trade, followed by going long on Japanese stocks.
Despite the gloomy macroeconomic outlook, the significant short covering of stocks in the Americas has reduced the proportion of fund managers reducing their holdings of stocks in this region from 44% to only 10%, the highest level this year.
Fund managers are bearish on Eurozone stocks for the first time this year.

According to the July survey of fund managers by Bank of America, 68% of respondents believe that the global economy will achieve a "soft landing". Most respondents expect the second quarter to be the trough of corporate profits, indicating that the profit decline for businesses has already ended. The most crowded trade that month was buying US large-cap tech stocks, followed by buying Japanese stocks.

Bank of America Survey: Betting on Soft Landing, Going Long on Large Tech Stocks Becomes the Most Crowded Trade