Following the vaccine breakthroughs, nine in 10 fund managers are predicting stronger economic growth next year.
Fund managers are the most bullish they have been all year following vaccine breakthroughs for Covid-19, says Bank of America Merrill Lynch.
In its Global Fund Manager Survey for December, the group found that professional investors are boosting their exposure to consumer stocks, commodities and emerging markets in preparation for economies to reopen for business post-pandemic.
The average cash position dropped from 4.1% to 4% as optimistic managers put cash to work in the markets. As a result, fund managers are underweight cash for the first time since 2013.
Around 42% of investors said they expect the coronavirus vaccine will begin to have a positive impact on the global economy from the second quarter of 2021, while a bullish 28% expected an effect from the first quarter. Now just 30% of investors say Covid-19 is the number one tail risk, down from 41% in the previous survey. It is perhaps no surprise then that the majority of respondents (89%) are predicting stronger economic growth next year.
- Three regions professional investors see as bright spots in 2021
- Income portfolio performances boosted by vaccine breakthroughs
- ii Super 60 investments: quality options for your portfolio, rigorously selected by our impartial experts
Emerging markets set to shine
Some 60% of those surveyed said emerging markets would be the best performer of 2021. Investors are running their highest allocations here since 2010, although they also remain overweight the US and Europe.
At the sector level, allocations to consumer discretionary and industrials are rising, and exposure to banks is at its first overweight since January. Technology has been a stellar performer in 2020 and it remains the largest overweight position among fund managers, while a record 31% of investors are long small-cap versus large-cap stocks. In fact, tech is still named as the most crowded trade, followed by short US dollar and long bitcoin.
Contrarian trades in December’s survey were to sell the vaccine in the first quarter of 2021, go long US dollar and short emerging markets, and to go long energy and consumer staples and short tech and industrials.
- Why UK funds and trusts could go from zero to hero in 2021
- Top-performing fund, investment trust and ETF data: December 2020
- Take control of your retirement planning with our award-winning, low-cost Self-Invested Personal Pension (SIPP)
Investor optimism for above-trend growth and low inflation currently surpasses even that seen during the recovery from the global financial crisis, notes Bank of America Merrill Lynch.
“2020 was a year utterly dominated by Covid-19, which caused the quickest economic and financial market collapse of all time,” says the group’s chief strategist Michael Hartnett. “However, just half a year later, recovery expectations have also surpassed prior recessions in both speed and magnitude.”
The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this data may not be suitable for all investors and, if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website.