As we already know, Michael Harnett and his team published the FMS, which was carried out among 258 managers with assets of around 680 million. Globally, the survey shows that 74% of managers expect a soft landing or even no landing. Landing, with a high percentage expecting short-term interest rate cuts. Investor sentiment remains low but suggests greater optimism, largely based on hopes that the Fed will cut interest rates in the first half of 2024 (38% of respondents) and in view of their opinion for major risks, particularly the real estate sector in China and commercial real estate in developed countries.
Between his Love and hate are on one side, Japan with the Largest overweight since December 2018 (The reader may refer to our note “The Head and Bottom Line of Funds Investing in the Japanese Market)” with which Quality in the sights and American technology China is considered the most saturated sector, while investors, on the contrary, avoid investing in China and therefore in emerging markets.
But they are also overweight in bonds, healthcare (underperforming so far) and utilities, with an underweight in REITs, mobile homes and the Eurozone and energy (despite the recent recovery in the latter).
However, expectations for global growth remain low and even worse for China. Liquidity, or cash, balance is at 4.9%, which is the upper part of the historical range of 4-5%, but below the level of 6.3% last October.
On your part the European managers show that they are more cautious about core global inflation, because while 81% last month expected inflation to fall next year, now only 69% trust it. However, the proportion of respondents saying that the Fed has already completed the interest rate increase is increasing.
63% of investors expect this European stocks will suffer a decline in the coming months in response to monetary tightening (up from 71% last month), but 61% now expect an increase next year (up from just 45% last month). 84% believe slowing growth and weaker inflation will have a negative impact on European stocks and 37% see lower earnings as the most likely cause of a market correction, followed by weaker macroeconomic data at 29%.
The lack of sufficient defensive protection to protect against slowing growth is the biggest risk when building a portfolio for a large number of investors (37%).
Among the sectors with The biggest overweight in Europe is pharmaceuticals, while the technological one loses weight. The most underweight sectors are dominated by cyclical stocks such as automobiles, retail and chemicals, and now also banks.
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