Analysts believe that after the Omicron scare, the time has come for a global reopening and they do not fear the imminent rise in interest rates in the United States, which are now moving forward to April, four months earlier than predicted in December. Hence, they now point out that it will be inflation and not global growth that will contract this year. Fifty-six percent of them believe that the rise in prices will be transitory.
By asset class, managers have opted to squeeze their liquidity and raise their bets on commodities – their allocation is at record highs – and on equities, while reducing their bet on the technology sector to 2008 lows in view of the imminent rise in interest rates.
Investors have thus opted to be very long on equities, especially European equities, banking, cyclicals and industrials, while shying away from bonds and emerging markets.
On Europe, 44% of managers surveyed by Bank of America believe that central bank tightening is the biggest risk to markets, up from 22% in November, and down from 33% in November to 21% of those who believe inflation is the main risk.
The percentage of managers who believe that the European stock market rally will extend into the fourth quarter of the year rises to 39%, up from 28% in December, and the rate of those who believe it has already peaked falls to 8%.
By country, Germany is the preferred destination for managers’ bets, at 22%, with Spain continuing to lose ground. It is the second most underweight country for the next twelve months, surpassed only by Switzerland.