(Kitco News) – According to the latest research from Bank of America, fund managers are slowly starting to put their cash to work again, even as they are the most overweight stocks in eight years.
In its latest Global Fund Manager Survey, the bank said that cash positions have dropped to 4.4%, down from October’s holding of 4.7%.
The survey does not bode well for investment demand for gold heading into 2022. The report says that 65% of fund managers expect to see strong economic growth next year. At the same time, 61% of survey respondents said that inflation pressures are transitory.
“In November, FMS investors got more bullish on the US as inflation fears waned i.e., investors are very [Over Weight}OW US equities on a historical basis and want to increase their exposure as well in the next 12 months,” the analysts said.
Although consumer price pressure is expected to ease next year, fund managers expect the Federal Reserve to remain well behind the inflation survey.
Looking at bond yields, only 11% of fund managers expect bond yields will be lower next year; however, indirectly direct opposition to market expectations, only 10% of fund managers expect the Federal Reserve to raise interest rates in the first half of next year.
“FMS investors are now on average expecting 1.5 Fed hikes in 2022 (up from 1.1 last month). 39% of investors expect two hikes, while 37% expect 1, and 13% expect none,” the report said.
According to CME’s FedWatch Tool, markets see the first rate hike in June of next year and are pricing in three rate hikes by the end of 2022.
Looking at specific asset classes, the survey said that fund managers expect bitcoin to continue to outperform gold. The report noted that 12% of survey participants said that bitcoin will be the best performing asset next year, compared to 10% who say gold and oil will be the bests assets.
Gold prices have struggled to attract sustainable investor interest as markets focus on tightening monetary policy, even as inflation pressures rise.
According to the survey, 34% of fund managers said emerging markets will be the top sector next year. In second place with 30% of the vote, the S&P 500 is expected to be the best-performing asset in 2022.
Looking at the crypto market space, while it is the third-top asset for 2022, the report noted that Bitcoin is the second most crowded trade, with 59% of fund managers thinking the digital currency is a bubble.
“Most investors expect Bitcoin to remain between $50k to $75k in the next 12 months,” the report said.
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