Global investor sentiment improved in September for the first time since June, driven by optimism about a soft landing and interest rate cuts by the U.S. Federal Reserve, according to a BofA survey of fund managers released Tuesday.
Cash allocations fell to 4.2%, according to the survey, as investors also shifted away from cyclical assets to bond-sensitive assets, driving overweight allocations to utilities to their highest level since 2008. Commodity exposure, meanwhile, fell to its lowest level in seven years.
BofA said investors who participated in the survey were described as “nervous bulls.”
Signs of a slowdown in the U.S. labor market and deterioration in other economic indicators have prompted traders to bet on an unusual rate cut at the Fed’s policy meeting this week.
Stocks hit record highs and bond prices also rose sharply as investors priced in the prospect of years of relief from high interest rates.
“52% of investors surveyed by fund managers believe that there will be no recession in the US economy in the next 18 months,” the bank said.
The survey, which covered the period from September 6 to 12 and included 243 respondents managing $666 billion in assets, showed that six in 10 respondents believe interest rates are too restrictive, the highest level in 16 years.
