Bullish Fund Managers, Bearish Retail Investors: A Tale of Two Markets
A recent survey by Bank of America reveals a surge in optimism among fund managers, with risk appetite reaching a 15-year high and cash levels hitting their lowest since 2010. They are particularly enthusiastic about international markets, with 34% expecting global equities to lead the pack this year.
However, a stark contrast emerges from the American Association of Individual Investors (AAII) survey. A whopping 47.3% of everyday investors express bearish sentiments for the next six months, reaching levels unseen since late 2023. This pessimism stems from concerns over policy uncertainties and the potential impact of US tariffs on economic growth and inflation.
Despite the AAII's grim outlook, Bank of America's respondents view a trade war as a tail risk. They believe the global economy is largely stable, with recession expectations at a three-year low and 77% anticipating US interest rate cuts in 2025.
Regarding stock valuations, Bank of America's survey reveals a shift in sentiment. While fund managers remain bullish on equities, 89% now consider US stocks overvalued, the highest level since 2001. Instead, they see opportunities in international markets, particularly Europe, with 89% expecting the EuroStoxx index to outperform the Nasdaq.
Investors are also optimistic about China's economic growth prospects, anticipating an acceleration in 2025.