Bank of America’s monthly fund manager survey has been special this November. The presidential elections in the United States took place while the managers responded to the questions of the American bank, and the results of the elections have been a before and after in the minds of those surveyed. Donald Trump’s victory has caused respondents to greatly improve their expectations for economic growth, and not only in the United States, but also in the global economy. Expectations that there will be inflation spikes in 12 months are once again in the majority, and reach levels not seen since summer 2021. In this context, managers once again tilt their portfolios towards the US marketand they point out how the main beneficiaries will be the country’s stock market, especially small capitalized ones, and the dollar.
The Republican victory in the US elections has triggered the optimism of fund managers. The results of the November survey by Bank of America make it clear: before knowing who would be the winner of the elections, the results of the survey pointed to a certain improvement in expectations for economic growth in the world, but that did not end to convince the skeptics. After 12 months, in fact, respondents still expected the economy to slow down its growth rate; however, After knowing the results of the elections, growth expectations skyrocketed to the highest levels seen since August 2021. There are now a net 23% of respondents (the percentage of managers who say they are positive about growth, minus the percentage of those who are pessimistic) who expect a stronger global economy next year.
This improvement in optimism has, not surprisingly, been even more focused on the United States. Before the results were known, 12-month growth expectations were negative, with a net -15% of respondents expecting a deterioration, and this figure has reversed to 28%. The turnaround has been so rapid that the possibility of the world economy landing in the next 12 months has almost been erased, as has been the scenario expected by analysts for more than a year: now only 55% of Respondents expect there to be a soft landing, and the possibility that the economy does not need to land rises to 33%, when in October, in the last survey, it was only 14%. Only 8% of those surveyed expect there to be a hard landing, a reflection of the improvement in macroeconomic prospects that has occurred this month.
A turn towards US assets
With the results of the elections on the table, managers have no doubt that the big winners of the elections will be American assets. Before knowing the results, when they were asked about the asset class that will perform best in 2025, the answers tied between “the world stock market” and “the US stock market.” However, once Trump’s victory was known, the responses clearly leaned towards the latter, with almost 45% of those surveyed pointing in this direction, above the 21% that the world stock market continues to indicate.
Within the American stock market, small capitalized companies now stand out as the big winners of the elections. Before the elections, respondents highlighted the Nasdaq as the stock index that would do best in 2025, but after the elections, the Russell 2000 has passed it to the right, and is positioned as the favorite for next year for the 35% of those surveyed. This confirms how managers consider that the economic policies proposed by Trump, whether tax cuts or high import tariffs, are perceived as especially positive for American small and medium-sized businesses.
Not only does the American stock market gain exposure with Trump’s victory: the dollar also stands out as one of the biggest winners. Before knowing the results of the elections, managers were especially optimistic about the Japanese yen, which led the polls as the favorite currency for 2025. However, the elections have given a turn to these expectations, and respondents placed the dollar at the head of looking ahead to next year, with 45% of them highlighting it as the best currency for that period. Gold has also seen improved expectations, and is the second favorite for 2025.
The great danger is once again inflation
Not everything is rosy for those surveyed. The improvement in economic growth prospects is associated with a danger: the return of inflation. Managers are aware that the price that will have to be paid for the growth that Trump’s policies will generate is a greater increase in prices, and the loss of purchasing power in the country.. Inflation expectations have soared to August 2021 highs in the surveyand for the first time since that year, managers surveyed by Bank of America believe that the CPI will be higher in the next 12 months than it is now.
In fact, it is a cause for concern, since respondents recognize that the greatest danger they perceive for the global economy at this time is that there will be a new acceleration in the rise of prices, a possibility that worries them more than conflicts. geopolitical, secondly, or that a recession occurs in the United States, a scenario that already seems to be almost ruled out.
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