The April Global Fund Managers Survey is not as bearish as March, yet the picture is of little hope and much gloom.
First, fears of the US Federal Reserve tightening faster than expected have weighed heavily on fund managers’ optimism about global growth. BofA Securities’s April survey showed that global growth expectations have fallen to their lowest level, with 71 per cent of respondents being pessimistic on the global growth outlook.
At the same time, stagflation expectations have reached their highest level since August 2008.
“With war fears easing, monetary risks (as risks to financial market stability) as well as inflationary fears have risen, which are at an all-time high,” the survey report said. “
Stagflation is a scenario of high inflation, low economic growth and persistently high levels of unemployment. Stagflation is also known as bearish-inflation.
Investors should note that retail inflation in the US hit a 40-year high of 8.5% in March. In India, inflation as measured through the Consumer Price Index rose to a 17-month high of 6.95% in March. In both cases, food inflation remains high, especially after the escalation of the Russia-Ukraine conflict.
It is no wonder then that the global recession continues to be the biggest risk to the portfolios of global fund managers. This is followed by aggressive central bank action on interest rates, inflation and the Russia-Ukraine conflict.
Rabo Bank analysts say that although a series of negative supply shocks may not drag the US economy into recession, the Fed’s late effort to bring inflation under control is likely to push the economy over the edge. “The Fed’s main policy error last year was to ignore and blindfold the increase in inflation,” the Rabo Bank report said. It will be very difficult.” 11 April.
Sharing similar concerns, Alan McIntosh, chief investment strategist at investment management firm Quilter Cheviot, said, “There is a lot of speculation about whether a recession is inevitable as a result of a rise in interest rates.” According to Macintosh, they are increasingly determined to prevent inflation from becoming embedded in the system. “At the end of the day, higher prices and the resulting pressure on disposable income should dampen demand. It is expected that central banks will pick this up quickly to avoid the dreaded “policy error,” he said in his note to customers. 11 April.
In its latest meeting, the Reserve Bank of India kept interest rates unchanged, though revised its inflation forecast for FY13. Following the latest CPI data, demand for a hike in interest rates in June is intensifying among Indian stock market participants.
Furthermore, global profit expectations hit the weakest level since March 2020. Investors should note that past examples of such low levels of profit growth have included the bursting of the dotcom bubble, the Lehman Brothers bankruptcy and the COVID pandemic.