Fears of a nasty US recession have magically vanished: BAML survey

Brian Sozzi · Executive Editor

Updated Tue, Nov 12, 2019, 3:37 AM

And just like that, those worries about a U.S. recession that gripped Wall Street over the summer have all but vanished.

A strong stock market rally in the fall and the return of an easy money Federal Reserve will have that effect.

About 6% of those fund managers polled in a new Bank of America Merrill Lynch survey this month expect a stronger global economy in the next year. That’s up an astounding 43 points from October. BAML says the marked month-to-month improvement suggests recession fears have pretty much disappeared.

The survey gauged expectations of 230 fund managers with $700 billion in assets under management.

The receding of recession fears has had several aftereffects, one which could get the attention of those at the Fed.

Inflation expectations surged 29 points from October, with 31% of investors polled expecting higher global consumer prices in the next year. Thus far, inflation has remained well below the Fed’s 2% preferred goal as measured by the personal consumption expenditures index (PCE). But BAML’s survey hints a strong showing by the stock market this fall could begin to fuel inflation in the months in various sectors in the months ahead.

Federal Reserve Chairman Jerome Powell speaks during a news conference in Washington, Wednesday, Oct. 30, 2019. (AP Photo/Susan Walsh)

Meanwhile, the fear of missing out (better known as “FOMO” on the Street) of this yearend rally is beginning to take hold.

Roughly 52% of those investors surveyed expect stocks to be the top performing asset class in 2020. Subsequently, investor cash levels have dropped to 4.2% in November from 5% in October. It represents the biggest monthly drop since November 2016 and the lowest cash balance going back to June 2013, BofA says.

Investor allocations to global equities jumped 20 points month-on-month to net 21% overweight, the highest level in a year.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

Read the latest financial and business news from Yahoo Finance