With a soft inflation report boosting markets Tuesday , a new survey reveals investors are betting big time that the Federal Reserve will embark on a series of interest rate cuts that revive the economy and rekindle the market rally that took a hit to start August. Ninety-three percent of the fund managers in the survey are expecting lower short-term rates in the next 12 months, marking the highest percentage in the past 24 years, BofA said. Moreover, investors now believe the central bank needs to cut rates more aggressively to guarantee a soft landing with 60% seeing four or more reductions in the next 12 months, according to BofA chief investment strategist Michael Hartnett, who compiled the report.
The survey results came after a swift market meltdown last week, triggered by fears of a recession on the heels of a disappointing jobs report. The stock market quickly recouped most of the losses in the following days, and another inflation report Wednesday could determine if the gains continue. The futures markets have fully priced in a rate cut at the Fed's September meeting, but it's a toss-up as to whether it will be a quarter-point cut or a half percentage point.
.SPX YTD mountain S & P 500 Only 31% of fund managers are overweight stocks now, down from 51% in July, the survey showed. Meanwhile, investors raised their cash levels slightly to 4.
3% in August from 4.1% last month. They are cutting their risk as concerns about the economy increase.
Global growth expectations are at their lowest in 8 months with about half of respondents expecting weaker growth the next 12 months, the survey showed. Still, the majority of investors (76%) expect the Fed to engineer a soft landing, up from 68% last month, the survey said. The August survey from BofA captured the sentiment of 220 respondents with $590 billion in assets under management.
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