Fund Managers Brace for Possible 2024 Recession Amid Economic Concerns

Banks have their fingers on the pulse of global finance, and the latest report from Bank of America suggests that fund managers are feeling a bit more optimistic about the global economy.

In the October 2023 Global Fund Manager Survey, it was revealed that 50% of those surveyed are expecting a weaker global economy in the coming year. While that might not sound like great news, it’s actually a slight improvement from the 53% who had that view in September.

If you’re thinking this all sounds a bit gloomy, you’re not wrong. Global growth expectations have been on a downward trajectory since last year, as the world grapples with record-high inflation and rising interest rates.

However, there’s a glimmer of hope: China’s economic prospects seem to be giving fund managers a reason to crack a smile.

The net share of those expecting a stronger Chinese economy in the next year jumped to 14% in October, up from a flatline in September.

This uptick could be attributed to China’s GDP growth outperforming expectations in the third quarter. It’s a welcome boost for the world’s second-largest economy, which has faced its fair share of challenges lately.

Yet, the spectre of a global recession still looms, with 44% of fund managers eyeing the first half of 2024 as the potential danger zone.

This number is up from 36% in September. On the flip side, only 5% are bracing for a recession before the end of this year, and a more optimistic 25% believe we’re in the clear for the next 18 months.

As for recession scenarios, 30% of fund managers are now predicting a “hard landing” for the global economy, which is an increase from the 21% who held that view in September.

Meanwhile, the percentage of those anticipating a “soft landing” (where central banks manage to control inflation through higher interest rates without plunging us into a recession) has taken a dip, falling by 10 percentage points to 64%.

On a brighter note, nearly 80% of fund managers are anticipating a drop in inflation over the next year. And three-quarters of them are looking for a steeper yield curve, which is essentially a fancy way of saying they’re expecting better economic growth.

A rising yield curve on long-term government bonds indicates that they have faith in a more prosperous future.

So, while the survey reflects lingering concerns about the global economy, it also suggests that fund managers are cautiously keeping an eye out for silver linings and hoping that the economic clouds will part in the coming months.

Source: Investopedia