Media365
The US-Israel war with Iran is rapidly reshaping global investment strategies, with fund managers slashing risk exposure and hoarding cash at the fastest pace since the Covid-19 pandemic, as rising geopolitical tensions and inflation fears replace artificial intelligence trade as the market’s top concerns, according to Bank of America (BofA).
Investor sentiment fell to a six-month low in March, while average cash allocations jumped to 4.3 per cent from 3.4 per cent a month earlier – the biggest jump since March 2020 – as expectations for global growth collapsed and inflation concerns surged amid escalating Middle East tensions, a Tuesday report based on a survey conducted by the US bank showed.
The survey “turns bearish” as US-Iran tensions and private credit concerns “end ‘frothy bull’ sentiment of recent months”, BofA investment strategists led by Michael Hartnett said.
Inflation expectations surged at the same time, with 45 per cent of respondents anticipating higher global consumer prices in the coming year, up from just 9 per cent a month earlier, the survey showed. Expectations for interest rate cuts had faded sharply, with only 17 per cent now expecting lower short-term rates, the lowest level since February 2023. That compared with 46 per cent a month ago.
Fund managers also sharply downgraded their outlook for the global economy. Those expecting stronger growth over the next 12 months plunged to 7 per cent from 39 per cent in February, while 51 per cent expected a stagflationary environment of below-trend growth and above-trend inflation, versus 42 per cent a month ago.
